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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549   FORM 10-K    ☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018 OR  ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM                 TO COMMISSION FILE NUMBER: 814-00849   SOLAR SENIOR CAPITAL LTD. (Exact name of registrant as specified in its charter)    Maryland

27-4288022(State of Incorporation)

(I.R.S. Employer
Identification Number)500 Park Avenue
New York, N.Y.

10022(Address of principal executive offices)

(Zip Code) Registrants telephone number, including area code:
(212) 993-1670 Securities registered pursuant to Section 12(b) of the Act:  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value
$0.01 per share

The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None   Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  ☐    No  ☒ Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  ☒    No  ☐ Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).    Yes  ☐    No  ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  ☒ Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated
filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.  Large accelerated filer

☐

Accelerated filer

☒Non-accelerated filer

☐

Smaller Reporting Company

☐Emerging growth company

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act)    Yes  ☐    No  ☒ The aggregate market value of common stock
held by non-affiliates of the Registrant on June 29, 2018 based on the closing price on that date of $16.31 on the NASDAQ Global Select Market was approximately $246.7 million. For the purposes of
calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 16,040,485 shares of the Registrants common stock outstanding as of February 15, 2019.




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SOLAR SENIOR CAPITAL LTD. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018 TABLE OF CONTENTS  PagePART IItem 1.

Business


1Item 1A.

Risk Factors


24Item 1B.

Unresolved Staff Comments


55Item 2.

Properties


55Item 3.

Legal Proceedings


55Item 4.

Mine Safety Disclosures


55PART IIItem 5.

Market for Registrants Common Equity, Related Stockholder Matters and
 Issuer Purchases of Equity Securities


56Item 6.

Selected Financial Data


59Item 7.

Managements Discussion and Analysis of Financial Condition and Results
 of Operations


59Item 7A.

Quantitative and Qualitative Disclosures about Market
Risk


76Item 8.

Financial Statements and Supplementary Data


77Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


112Item 9A.

Controls and Procedures


112Item 9B.

Other Information


112PART IIIItem 10.

Directors, Executive Officers and Corporate Governance


113Item 11.

Executive Compensation


119Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
 Stockholder Matters


121Item 13.

Certain Relationships and Related Transactions, and Director Independence


122Item 14.

Principal Accounting Fees and Services


125PART IVItem 15.

Exhibits, Financial Statement Schedules


127Item 16.

Form 10-K
Summary


128Signatures


129




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PART I  Item 1.
Business Solar Senior Capital Ltd. (Solar Senior, the Company, SUNS, we, us or
our), a Maryland corporation formed in December 2010, is a closed-end, externally managed, non-diversified management investment company that has elected to
be regulated as a business development company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). Furthermore, as the Company is an investment company, it continues to apply the guidance in the
Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) Topic 946. In addition, for U.S federal income tax purposes, we have elected, and intend to qualify annually, to be treated as a regulated
investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). On
February 24, 2011, we priced our initial public offering (the IPO), selling 9.0 million shares, including the underwriters over-allotment, raising approximately $168 million in net proceeds. Concurrent with this
offering, Solar Senior Capital Investors LLC, an entity controlled by Michael S. Gross, our Chairman and Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, purchased an additional 500,000 shares of our common stock through a
private placement transaction exempt from registration under the Securities Act of 1933, as amended, or the Securities Act (the Concurrent Private Placement), raising another $10 million. We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and the
investment opportunities are most attractive. We define middle market to refer to companies with annual revenues typically between $50 million and $1 billion. Our investment objective is to seek to maximize current income
consistent with the preservation of capital. We seek to achieve our investment objective by directly and indirectly investing in senior loans, including first lien, stretch-senior, unitranche, and second lien debt instruments, made to private
middle-market companies whose debt is rated below investment grade, which we refer to collectively as senior loans. Our investments in stretch-senior loans represent loans where the amount of senior debt of the portfolio company is
larger than a traditional senior secured loan but is less than a unitranche loan. We may also invest directly in the debt and equity securities of public companies that are thinly traded or in other equity and equity related securities and such
investments may not be limited to any minimum or maximum market capitalization. In addition, we may invest in foreign markets, including emerging markets. Under normal market conditions, at least 80% of the value of our net assets (including the
amount of any borrowings for investment purposes) will be invested directly or indirectly in senior loans. Senior loans typically pay interest at rates which are determined periodically on the basis of a floating base lending rate, primarily LIBOR,
plus a premium. Senior loans in which we invest are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and
geographical regions. Senior loans typically are rated below investment grade. In addition, some of our debt investments will not fully amortize during their lifetime, which could result in a loss or a substantial amount of unpaid principal and
interest due upon maturity. Securities rated below investment grade are often referred to as leveraged loans, high yield or junk securities, and may be considered high risk compared to debt instruments
that are rated investment grade. While the Company does not typically seek to invest in traditional equity securities as part of its investment objective, the Company may occasionally acquire some equity securities in connection with senior loan
investments and in certain other unique circumstances, such as the Companys equity investments in business that exclusively make senior loans, including Gemino Healthcare Finance, LLC (Gemino) and North Mill Capital LLC
(NMC). We invest in senior loans made primarily to private, leveraged middle-market companies with approximately
$20 million to $100 million of earnings before income taxes, depreciation and amortization (EBITDA). Our business model is focused primarily on the direct origination of investments through portfolio companies or their
financial sponsors. Our direct investments in individual securities generally range between $5 million and $30 million each, although we expect that this investment size will vary with the size of our capital base and/or strategic
initiatives. In addition, we may invest a portion of our portfolio in other types of  1




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investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These opportunistic investments may include, but are
not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States. We may invest up to 30% of our total assets in such opportunistic
investments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as a BDC under the 1940 Act. Our investment activities are managed by Solar Capital Partners, LLC
(Solar Capital Partners or the Investment Adviser) and supervised by our board of directors, a majority of whom are non-interested, as such term is defined in the 1940 Act. Solar
Capital Management, LLC (Solar Capital Management) provides the administrative services necessary for us to operate. As of
December 31, 2018, our investment portfolio totaled $450.1 million and our net asset value was $261.4 million. Our portfolio was comprised of debt and equity investments in 47 portfolio companies. During our fiscal year ended December 31, 2018, we invested approximately $186 million across 34 portfolio companies. Investments
sold or prepaid during the fiscal year ended December 31, 2018 totaled $193 million. Solar Capital Partners Solar Capital Partners, our investment adviser, is controlled and led by Michael S. Gross, our Chairman and Chief Executive Officer, and
Bruce Spohler, our Chief Operating Officer. They are supported by a team of dedicated investment professionals. Solar Capital Partners investment team has extensive experience in leveraged lending and private equity, as well as significant
contacts with financial sponsors. In addition, at December 31, 2018, Solar Capital Partners serves as investment adviser to private
funds and managed accounts as well as to Solar Capital Ltd., or Solar Capital, another publicly traded BDC that primarily invests directly and indirectly in leveraged, U.S. middle market companies in the form of cash flow senior secured
investments including first lien and second lien debt instruments and asset-based investments including senior loans. Through December 31, 2018, the investment team led by Messrs. Gross and Spohler has invested approximately $8 billion in
more than 360 different portfolio companies involving approximately 200 different financial sponsors. As of February 15, 2019, Mr. Gross and Mr. Spohler beneficially owned, either directly or indirectly, approximately 5.4% of our
outstanding common stock. Solar Capital Management Pursuant to an administration agreement (the Administration Agreement), Solar Capital Management furnishes us with office
facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, Solar Capital Management also performs, or oversees the performance of, our required administrative services, which
include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our stockholders. In addition, Solar Capital Management assists us in determining and publishing our net asset value,
oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to
us by others. Solar Capital Management also provides managerial assistance, if any, on our behalf to those portfolio companies that request such assistance. Investments Solar Senior Capital seeks
to create a diverse portfolio of senior loans by investing approximately $5 million to $30 million of capital, on average, in the individual securities of leveraged companies, including middle-market companies. We expect that this
investment size will vary proportionately with the size of our capital base and/or strategic initiatives. We may also invest in the debt and equity of public companies that are thinly traded. Under normal market conditions, at least 80% of the value
of our net assets (including the amount of any borrowings for investment purposes) will be invested directly or indirectly in senior loans.  2




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Senior loans typically pay interest at rates which are determined periodically on the basis
of a floating base lending rate, primarily LIBOR, plus a spread or premium. Senior loans in which we invest are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other
business entities which operate in various industries and geographical regions. Senior loans typically are rated below investment grade. Securities rated below investment grade are often referred to as leveraged loans, high
yield or junk securities, and may be considered high risk compared to debt instruments that are rated investment grade. Senior loans, however are generally less risky than subordinated debt, bearing lower leverage and
higher recovery statistics. In addition, many of our debt investments will not fully amortize during their lifetime, which could result in a loss or a substantial amount of unpaid principal and interest due upon maturity. In addition to senior loans, we may invest a portion of our portfolio in opportunistic investments, which are not our primary focus, but are
intended to enhance our returns to stockholders. These investments may include similar direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
We may invest up to 30% of our total assets in such opportunistic investments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as a BDC under the 1940 Act. We currently borrow funds under our credit facilities and may borrow additional funds to make investments. As a result, we are exposed to the
risks of leverage, which may be considered a speculative investment technique. The use of leverage magnifies the potential for loss on amounts invested and therefore increases the risks associated with investing in our securities. In addition, the
costs associated with our borrowings, including any increase in management fees payable to our investment adviser, Solar Capital Partners, will be borne by our common stockholders. Additionally, we may in the future seek to securitize our loans to generate cash for funding new investments. To securitize loans, we may
create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. This could include the sale of interests in the subsidiary on a non-recourse basis to purchasers who we would expect to be
willing to accept a lower interest rate to invest in investment grade loan pools, and we would retain a portion of the equity in the securitized pool of loans. Moreover, we may acquire investments in the secondary market and, in analyzing such investments, we expect to employ the same or similar
analytical process as we use for our primary investments. We may utilize instruments such as forward contracts, currency options and
interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our
portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same
developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. It may not be possible to
hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price. Moreover, for a variety of reasons, we may not seek to establish a perfect
correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully
or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not entirely
related to currency fluctuations. Our principal focus is to provide senior loans, including first lien, stretch-senior and unitranche
loans, to private middle-market companies in a variety of industries. We generally seek to target companies that generate positive cash flows and/or have substantial assets that secure our loans. We generally seek to invest in companies  3




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from the broad variety of industries in which our investment adviser has direct expertise. The following is a representative list of the industries in which we may invest.    Aerospace & Defense

  Health Care Facilities  Air Freight & Logistics

  Health Care Providers & Services  Asset Management

  Health Care Technology  Automobiles

  Hotels, Restaurants & Leisure  Automotive Retail

  Industrial Conglomerates  Beverages

  Insurance  Building Products

  Internet Services & Infrastructure  Capital Markets

  IT Services  Chemicals

  Leisure Equipment & Products  Commercial Services & Supplies

  Machinery  Communications Equipment

  Media  Construction & Engineering

  Multiline Retail  Consumer Finance

  Paper & Forest Products  Containers & Packaging

  Personal Products  Distributors

  Pharmaceuticals  Diversified Consumer Services

  Professional Services  Diversified Financial Services

  Real Estate Management & Development  Diversified Real Estate Activities

  Research & Consulting Services  Diversified Telecommunications Services

  Software  Education Services

  Specialty Retail  Electronic Equipment, Instruments & Components

  Textiles, Apparel & Luxury Goods  Food Products

  Utilities  Footwear

  Wireless Telecommunications Services  Health Care Equipment & Supplies We may also invest in other industries if we are presented with attractive opportunities. We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds. We
may also participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is Solar Capital Partners, or an investment adviser controlling, controlled by or under
common control with Solar Capital Partners and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the Advisers Act) in a manner consistent with our investment objective, positions, policies,
strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the new exemptive order obtained from the Securities and Exchange Commission (SEC) on June 13, 2017, which
supersedes the exemptive order we originally obtained on July 28, 2014. Pursuant to the exemptive order, we are permitted to co-invest with our affiliates if a required majority (as defined in
Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential
co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any
person concerned, and (2) the potential co-investment transaction is consistent with the interests of our stockholders and is consistent with our then-current investment objective and strategies. At December 31, 2018, our portfolio consisted of 47 portfolio companies and was invested 77.8% directly in senior secured loans and 22.2%
in common equity/equity interests/warrants (of which 7.2% is Gemino and 14.9% is NMC, through which the Company indirectly investments in senior secured loans), in each case, measured at fair value. We expect that our portfolio will continue to
primarily include senior secured loans.  4




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While our primary investment objective is to maximize current income through direct and
indirect investments in U.S. senior secured loans, and we may also invest a portion of the portfolio in opportunistic investments, including foreign securities. Listed below are our top ten portfolio companies and industries based on their fair value and represented as a percentage of total assets as
of December 31, 2018 and 2017: TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2018  Portfolio Company

% of TotalAssetsNorth Mill Capital LLC*


14.6
%Gemino Healthcare Finance LLC*.


7.1
%Ministry Brands, LLC.


3.1
%On Location Events, LLC & PrimeSport Holdings Inc


3.1
%Confie Seguros Holding II Co.


3.1
%American Teleconferencing Services, Ltd


3.0
%1A Smart Start LLC


3.0
%Edgewood Partners Holdings, LLC


2.9
%Capstone Logistics Acquisition, Inc.


2.7
%KORE Wireless Group, Inc.


2.6
%  *
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies
of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment.  Industry

% of TotalAssetsDiversified Financial Services


21.7
%Health Care Providers & Services


15.5
%Professional Services


11.6
%Insurance


11.0
%Software


10.4
%Communications Equipment


5.4
%Media


3.1
%Electronic Equipment, Instruments & Components


3.0
%Wireless Telecommunication Services


2.6
%Chemicals


2.6
% TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2017  Portfolio Company

% of TotalAssetsNorthMill, LLC


9.8
%First Lien Loan Program LLC


6.9
%Gemino Healthcare Finance LLC


6.7
%On Location Events, LLC & PrimeSport Holdings Inc


2.8
%American Teleconferencing Services, Ltd


2.8
%Polycom, Inc.


2.3
%Logix Holding Company, LLC


2.0
%PetVet Care Centers, LLC.


2.0
%Confie Seguros Holding II Co.


1.9
%Ministry Brands, LLC


1.8
%  5




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Industry

% of TotalAssetsDiversified Financial Services


16.5
%Communications Equipment


8.4
%Health Care Providers & Services


8.0
%Asset Management


7.6
%Professional Services


6.7
%Insurance


6.5
%Software


5.7
%Media


2.8
%Electronic Equipment, Instruments & Components


2.7
%Internet Software & Services


2.5
% Investment Selection Process Solar Capital Partners is committed to and utilizes a value-oriented investment philosophy with a focus on the preservation of capital and a
commitment to managing downside exposure. Portfolio Company Characteristics We have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These
criteria provide general guidelines for our investment decisions; however, not all of these criteria will be met by each prospective portfolio company in which we choose to invest. Stable Earnings and Strong Free Cash Flow. We seek to invest in companies who have demonstrated stable earnings
through economic cycles. We target companies that can de-lever through consistent generation of cash flows rather than relying solely on growth to service and repay our loans. Value Orientation. Our investment philosophy places a premium on fundamental analysis from an investors perspective and
has a distinct value orientation. We focus on companies in which we can invest at relatively low multiples of operating cash flow and that are profitable at the time of investment on an operating cash flow basis. Value of Assets. The prospective value of the assets, if any, that collateralizes the loans in which we invest, is an important
factor in our credit analysis. Our analysis emphasizes both tangible assets, such as accounts receivable, inventory, equipment and real estate, and intangible assets, such as intellectual property, customer lists, networks and databases. In some of
our transactions the companys fundings may be derived from a borrowing base determined by the value of the companys assets. Strong Competitive Position in Industry. We seek to invest in target companies that have developed leading market positions
within their respective markets and are well positioned to capitalize on growth opportunities. We seek companies that demonstrate significant competitive advantages versus their competitors, which we believe should help to protect their market
position and profitability. Diversified Customer and Supplier Base. We seek to invest in businesses that have a diversified
customer and supplier base. We believe that companies with a diversified customer and supplier base are generally better able to endure economic downturns, industry consolidation, changing business preferences and other factors that may negatively
impact their customers, suppliers and competitors. Exit Strategy. We predominantly invest in companies which provide
multiple alternatives for an eventual exit. We look for opportunities that provide an exit typically within three years of the initial capital commitment.  6




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We generally seek companies that we believe have or will provide a steady stream of cash
flow to repay our loans and reinvest in their respective businesses. We believe that such internally generated cash flow, leading to the payment of our interest, and the repayment of our principal, represent a key means by which we will be able to
exit from our investments over time. In addition, we also seek to invest in companies whose business models and expected future cash
flows or cash positions offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock
or another capital market transaction. We underwrite our investments on a held-to-maturity basis, but expensive capital is often repaid prior to stated maturity. Experienced and Committed Management. We generally require that portfolio companies have an experienced management team. We also
require portfolio companies have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests. Strong Sponsorship. We generally aim to invest alongside other sophisticated investors. We typically seek to partner with
successful financial sponsors who have historically generated high returns. We believe that investing in these sponsors portfolio companies enables us to benefit from their direct involvement and due diligence. Solar Seniors investment team works in concert with sponsors to proactively manage investment opportunities by acting as a partner
throughout the investment process. We actively focus on the middle-market financial sponsor community, with a particular focus on the upper-end of the middle-market (sponsors with equity funds of
$800 million to $3 billion). We favor such sponsors because they typically:  

buy larger companies with strong business franchises;  

invest significant amounts of equity in their portfolio companies;  

value flexibility and creativity in structuring their transactions;  

possess longer track records over multiple investment funds;  

have a deeper management bench;  

have better ability to withstand downturns; and  

possess the ability to support portfolio companies with additional capital. We divide our coverage of these sponsors among our more senior investment professionals, who are responsible for day-to-day interaction with financial sponsors. Our coverage approach aims to act proactively, consider all investments in the capital structure, provide quick feedback,
deliver on commitments, and are constructive throughout the life cycle of an investment. Due Diligence Our private equity approach to credit investing typically incorporates extensive in-depth
due diligence often alongside the private equity sponsor. In conducting due diligence, we will use publicly available information as well as information from relationships with former and current management teams, consultants, competitors and
investment bankers. We believe that our due diligence methodology allows us to screen a high volume of potential investment opportunities on a consistent and thorough basis. Our due diligence typically includes:  

review of historical and prospective financial information;  7




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

review and valuation of assets;  

research relating to the companys management, industry, markets, products and services and competitors;  

on-site visits;  

discussions with management, employees, customers or vendors of the potential portfolio company;  

review of senior loan documents; and  

background investigations. We also expect to evaluate the private equity sponsor making the investment. Further, due to Solar Capital Partners considerable repeat
business with sponsors, we have direct experience with the management teams of many sponsors. A private equity sponsor is typically the controlling stockholder upon completion of an investment and as such is considered critical to the success of the
investment. The equity sponsor is evaluated along several key criteria, including:  

investment track record;  

industry experience;  

capacity and willingness to provide additional financial support to the company through additional capital
contributions, if necessary; and  

reference checks. Throughout the due diligence process, a deal team is in constant dialogue with the management team of the company in which we are considering
to invest to ensure that any concerns are addressed as early as possible through the process and that unsuitable investments are filtered out before considerable time has been invested. Upon the completion of due diligence and a decision to proceed with an investment in a company, the investment professionals leading the
investment present the investment opportunity to Solar Capital Partners investment committee, which then determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our
behalf by attorneys and independent accountants prior to the closing of the investment, as well as other outside advisers, as appropriate. The Investment Committee All new investments are required to be approved by a consensus of the investment committee of Solar Capital Partners, which is led by Messrs.
Gross and Spohler. The members of Solar Capital Partners investment committee receive no compensation from us. Such members may be employees or partners of Solar Capital Partners and may receive compensation or profit distributions from Solar
Capital Partners. Investment Structure Once we determine that a prospective portfolio company is suitable for investment, we will work with the management of that company and its
other capital providers, including senior, junior and equity capital providers, to structure an investment. We negotiate among these parties to agree on how our investment is expected to perform relative to the other capital in the portfolio
companys capital structure. We seek to invest in portfolio companies primarily in the form of senior loans. These senior loans
typically have current cash pay interest with some amortization of principal. Interest is typically paid on a floating rate basis, often with a floor on the LIBOR rate. We generally seek to obtain security interests in the assets of our portfolio
companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first or second priority liens on the assets of a portfolio company.  8




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Typically, we expect that our senior loans will have final maturities of four to seven
years. However, we also expect that our portfolio companies often may repay these loans early, generally within three years from the date of initial investment. In some cases and when available, we seek to structure these loans with prepayment
premiums to capture foregone interest. In the case of our senior secured loan investments, we seek to tailor the terms of the investment
to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its business plan and
improve its profitability. For example, in addition to seeking a senior position in the capital structure of our portfolio companies, we may be able to limit the downside potential of our investments by:  

requiring a total return on our investments (including both interest and potential capital appreciation) that
compensates us for credit risk;  

incorporating put rights and call protection into the investment structure; and  

negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility
in managing their businesses as possible, consistent with preservation of our capital. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights, including
either observation or participation rights. Our investments may include equity features, such as warrants or options to
buy a minority interest in the portfolio company. Any warrants we receive with our debt securities generally require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we may achieve additional investment return
from this equity interest. In addition, we may from time to time make direct equity investments in portfolio companies. We generally seek
to hold most of our investments to maturity or repayment, but believe we have the ability to sell our investments earlier, including if a liquidity event takes place such as the sale or recapitalization of a portfolio company. Ongoing Relationships with Portfolio Companies Solar Capital Partners monitors our portfolio companies on an ongoing basis. Solar Capital Partners monitors the financial trends of each
portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company. Solar
Capital Partners has several methods of evaluating and monitoring the performance and fair value of our investments, which include the following:  

Assessment of success in adhering to each portfolio companys business plan and compliance with covenants;  

Periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic
sponsor, to discuss financial position, requirements and accomplishments;  

Comparisons to other Solar Capital and Solar Senior Capital portfolio companies in the industry, if any; and  

Review of monthly and quarterly financial statements, asset valuations, and financial projections for portfolio
companies. In addition to various risk management and monitoring tools, Solar Capital Partners also uses an investment
rating system to characterize and monitor our expected level of returns on each investment in our portfolio.  9




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We use an investment rating scale of 1 to 4. The following is a description of the
conditions associated with each investment rating:  Investment
Rating

Summary Description1

Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk factors are generally favorable (including a potential exit)2

Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk factors are neutral to favorable; all new investments are initially assessed a grade of 23

The portfolio company is performing below expectations, may be out of compliance with debt covenants, and requires procedures for closer monitoring4

The investment is performing well below expectations and is not anticipated to be repaid in full Solar Capital Partners monitors and, when appropriate, changes the investment ratings assigned to each
investment in our portfolio. As of December 31, 2018 and December 31, 2017, the weighted average investment rating on the fair market value of our portfolio was 2. In connection with our valuation process, Solar Capital Partners reviews
these investment ratings on a quarterly basis. Valuation Procedures We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP and the 1940
Act. Our valuation procedures are set forth in more detail below: The Company conducts the valuation of its assets in accordance with
GAAP and the 1940 Act. The Company generally values its assets on a quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closing price on the date of
valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to
GAAP to determine the fair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium,
which is expected to approximate fair value, unless such valuation, in the judgment of the Investment Adviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the
direction of the Companys board of directors (the Board). Investments for which reliable market quotations are not
readily available or for which the pricing sources do not provide a valuation or methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, each shall be valued as
follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser;
(iii) independent valuation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Advisers preliminary valuations and make their own independent assessment for (a) each portfolio
investment that, when taken together with all other investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each portfolio
investment that is presently in payment default; (iv) the Board will discuss the valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate, the
respective independent valuation firm. The recommendation of fair value generally considers the following factors among others, as
relevant: applicable market yields; the nature and realizable value of any collateral; the portfolio companys ability to make payments; the portfolio companys earnings and discounted cash flow; the markets in which the issuer does
business; and comparisons to publicly traded securities, among others.  10




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When an external event such as a purchase transaction, public offering or subsequent equity
sale occurs, the Company will consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair
value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. The market approach uses prices and other
relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to a
single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing
our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and
realizable value of any collateral, the portfolio companys ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are
public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the fiscal year ended
December 31, 2018, there has been no change to the Companys valuation approaches or techniques and the nature of the related inputs considered in the valuation process. ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy: Level1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the
measurement date. Level2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for
identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices. Level3: Unobservable inputs for the asset or liability. In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The
exercise of judgment is based in part on our knowledge of the asset class and our prior experience. Determination of fair value involves
subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial
statements. Competition Our primary
competitors provide financing to middle-market companies and include other BDCs, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity funds. Additionally,
alternative investment vehicles, such as hedge funds, frequently invest in middle-market companies. As a result, competition for investment opportunities at middle-market companies can be intense. While many middle-market companies were previously
able to raise senior debt financing through traditional large financial institutions, we believe this approach to financing is more difficult as implementation of U.S. and international financial reforms limits the capacity of large financial  11




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institutions to hold non-investment grade leveraged loans on their balance sheets. We believe that many of these financial institutions have de-emphasized their service and product offerings to middle-market companies in particular. Many of our
competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In
addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not
subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company. We use the industry information available to Messrs. Gross and Spohler and the other investment professionals of Solar Capital Partners to
assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that the relationships of Messrs. Gross and Spohler and the other senior investment professionals of our investment
adviser enable us to learn about, and compete effectively for, financing opportunities with attractive leveraged companies in the industries in which we seek to invest. Staffing We do not currently have any
employees. Mr. Gross, our Chairman and Chief Executive Officer, and Mr. Spohler, our Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial and controlling interests in,
Solar Capital Partners. In addition, Mr. Peteka, our Chief Financial Officer, Treasurer and Corporate Secretary serves as the Chief Financial Officer for Solar Capital Partners. Guy Talarico, our Chief Compliance Officer, is the Chief Executive
Officer of Alaric Compliance Services, LLC, and performs his functions as our Chief Compliance Officer under the terms of an agreement between Solar Capital Management and Alaric Compliance Services, LLC. Solar Capital Management has retained
Mr. Talarico and Alaric Compliance Services, LLC pursuant to its obligations under our Administration Agreement. Our day-to-day investment operations are managed by Solar Capital Partners. Based upon its needs, Solar Capital Partners may hire additional investment professionals. In addition,
we will reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of the
Companys chief compliance officer and chief financial officer and their respective staffs. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these
requirements affect us. For example:  

Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the
1934 Act), our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the consolidated financial statements contained in our periodic reports;  

Pursuant to Item 307 of Regulation S-K, our periodic reports must
disclose our conclusions about the effectiveness of our disclosure controls and procedures;  

Pursuant to Rule 13a-15 of the 1934 Act, our management must prepare an
annual report regarding its assessment of the effectiveness of internal controls over financial reporting and obtain an audit of the effectiveness of internal controls over financial reporting performed by our independent registered public
accounting firm; and  

Pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the 1934 Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.  12




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The Sarbanes-Oxley Act of 2002 requires us to review our current policies and procedures to
determine whether we comply with the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act of 2002 and will take actions
necessary to ensure that we are in compliance therewith. Business Development Company Regulations A BDC is regulated by the 1940 Act. A BDC must be organized in the United States for the purpose of investing in or lending to primarily
private companies and making significant managerial assistance available to them. A BDC may use capital provided by public stockholders and from other sources to make long-term, private investments in businesses. A BDC provides stockholders the
ability to retain the liquidity of a publicly traded stock while sharing in the possible benefits, if any, of investing in primarily privately owned companies. We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a majority
of our outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such companys voting securities present at
a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipate any substantial change in the
nature of our business. As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory
requirements. A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to
protect the BDC. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such persons office. As a BDC, we had been required to meet an asset coverage ratio, reflecting the
value of our total assets to our total senior securities, which include all of our borrowings and any preferred stock we may issue in the future, of at least 200%. However, our stockholders have approved a resolution permitting us to be subject to a
150% asset coverage ratio effective as of October 12, 2018. We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested
persons and, in some cases, prior approval by the SEC. The Small Business Credit Availability Act (SBCA) instructs the SEC to
issue rules or amendments to rules allowing BDCs to use the same securities offering and proxy rules that are available to operating companies, including, among other things, allowing BDCs to incorporate by reference in registration statements filed
with the SEC and allow certain BDCs to file shelf registration statements that are automatically effective and take advantage of other benefits available to Well-Known Seasoned Issuers; however, as of the date of this filing, we do not know when the
rules relating to this legislation will become effective. We are generally not able to issue and sell our common stock at a price below
net asset value per share without annual stockholder approval. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if our board of
directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. At our Annual Meeting of Stockholders on October 11, 2018, our stockholders approved a proposal
authorizing us to sell up to 25% of our common stock at a price below our then-current asset value per share, subject to the approval by our board of directors for the offering. This authorization expires on the earlier of October 11, 2019 and
the date of our 2019 Annual Meeting of Stockholders. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing stockholders, in payment of dividends and in certain other
limited circumstances.  13




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As a BDC, we were substantially limited in our ability to
co-invest in privately negotiated transactions with affiliated funds until we obtained an exemptive order from the SEC on July 28, 2014 (the Prior Exemptive Order). The Prior Exemptive Order
permitted us to participate in negotiated transactions with certain affiliates, each of whose investment adviser was Solar Capital Partners in a manner consistent with our investment objective, positions, policies, strategies and restrictions as
well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the Prior Exemptive Order. On June 13, 2017, the Company, Solar Capital Ltd., and Solar Capital Partners, et al., received an exemptive order that
supersedes the Prior Exemptive Order (the New Exemptive Order) and extends the relief granted in the Prior Exemptive Order such that it no longer applies to certain affiliates only if their respective investment adviser is Solar Capital
Partners, but also applies to certain affiliates whose investment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital Partners and is registered as an investment adviser under the Advisers
Act. The terms of the New Exemptive Order are otherwise substantially similar to the Prior Exemptive Order. Co-investment under the New Exemptive Order is subject to certain conditions therein, including the
condition that, in the case of each co-investment transaction, our board of directors determines that it would be in our best interest to participate in the transaction. If we are unable to rely on the New
Exemptive Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent
with more than one entitys investment strategy, on an alternating basis. However, neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us
or them. We will be periodically examined by the SEC for compliance with federal securities laws, including the 1940 Act. Qualifying Assets Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are
referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDCs total assets. The principal categories of qualifying assets relevant to our business are the following:  (1)
Securities purchased in transactions not involving any public offering from the issuer of such securities,
which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to
such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which: (a) is organized under the laws of, and has its principal place of business in, the United States; (b) is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that
would be an investment company but for certain exclusions under the 1940 Act; and (c) satisfies any of the following: i.) does not have any class of securities that is traded on a national securities exchange; ii.) has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding
voting and non-voting common equity of less than $250 million; iii.) is
controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or iv.) is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less
than $2.0 million.  (2)
Securities of any eligible portfolio company which we control, which, as defined by the 1940 Act, is presumed
to exist where a BDC beneficially owns more than 25% of the outstanding voting securities of the portfolio company.  14




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(3)
Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an
affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came
due without material assistance other than conventional lending or financing arrangements.  (4)
Securities of an eligible portfolio company purchased from any person in a private transaction if there is no
ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.  (5)
Securities received in exchange for or distributed on or with respect to securities described in
(1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.  (6)
Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less
from the time of investment.  (7)
Office furniture and equipment, interests in real estate and leasehold improvements and facilities maintained
to conduct the business operations of the BDC, deferred organization and operating expenses, and other noninvestment assets necessary and appropriate to its operations as a BDC, including notes of indebtedness of directors, officers, employees, and
general partners held by a BDC as payment for securities of such company issued in connection with an executive compensation plan described in Section 57(j) of the 1940 Act. Under Section 55(b) of the 1940 Act, the value of a BDCs assets shall be determined as of the date of the most recent financial
statements filed by such company with the SEC pursuant to Section 13 of the 1934 Act, and shall be determined no less frequently than annually. Significant Managerial Assistance to Portfolio Companies As a BDC, we offer, and must provide upon request, significant managerial assistance to our portfolio companies. This assistance could involve,
among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. We may
also receive fees for these services. Solar Capital Management provides such managerial assistance, if any, on our behalf to portfolio companies that request this assistance. Temporary Investments Pending investment in other types of qualifying assets, as described above, our investments may consist of cash, cash equivalents,
U.S. government securities or high-quality investment grade debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets.
Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such repurchase agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the
purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an
agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single
counterparty, we would not meet the diversification tests in order to qualify as a RIC for U.S. federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our
investment adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.  15




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Senior Securities We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if
our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. In addition, while certain senior securities remain outstanding, we may be required to make provisions to prohibit any distribution to
our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or
emergency purposes without regard to asset coverage. We may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us. Code of Ethics We
and Solar Capital Partners have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that
establishes procedures for personal investments and restricts certain transactions by our personnel. Our codes of ethics generally do not permit investments by our employees in securities that may be purchased or held by us. Each code of ethics is
available on the EDGAR Database on the SECs Internet site at http://www.sec.gov. You may also obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following Email address: publicinfo@sec.gov. Compliance Policies and Procedures We and our investment adviser have adopted and implemented written policies and procedures reasonably designed to detect and prevent violation
of the federal securities laws. We are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and to designate a chief compliance officer to be responsible for their
administration. Guy Talarico currently serves as our Chief Compliance Officer. Proxy Voting Policies and Procedures We have delegated our proxy voting responsibility to our investment adviser. A summary of the Proxy Voting Policies and Procedures of our
adviser are set forth below. The guidelines are reviewed periodically by the adviser and our non-interested directors, and, accordingly, are subject to change. As an investment adviser registered under the Advisers Act, Solar Capital Partners has a fiduciary duty to act solely in the best interests of
its clients. As part of this duty, it recognizes that it must vote securities held by its clients in a timely manner free of conflicts of interest. These policies and procedures for voting proxies for investment advisory clients are intended to
comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act. Our investment
adviser votes proxies relating to our portfolio securities in the best interest of our stockholders. Solar Capital Partners reviews on a case-by-case basis each proposal
submitted for a proxy vote to determine its impact on our investments. Although it generally votes against proposals that may have a negative impact on our investments, it may vote for such a proposal if there exists compelling long-term reasons to
do so. The proxy voting decisions of our investment adviser are made by the senior investment professionals who are responsible for monitoring each of our investments. To ensure that our vote is not the product of a conflict of interest, it requires
that: (i) anyone involved in the decision making process disclose to a managing member of Solar Capital Partners any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a
proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties. You may obtain information about how we voted proxies by making a written request for proxy voting information to: Solar Capital Partners,
LLC, 500 Park Avenue, New York, NY 10022.  16




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Privacy Principles We are committed to maintaining the privacy of our stockholders and to safeguarding their non-public
personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties. Generally, we do not receive any non-public personal information relating to our stockholders,
although certain non-public personal information of our stockholders may become available to us. We do not disclose any non-public personal information about our
stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator). We restrict access to non-public personal information about our stockholders to employees of our
investment adviser and its affiliates with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of
our stockholders. Taxation as a Regulated Investment Company As a BDC, we elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally will not
have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to qualify for RIC tax treatment we must distribute to our stockholders, for each
taxable year, at least 90% of our investment company taxable income, which generally is our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (the Annual
Distribution Requirement). If we qualify as a RIC and satisfy the Annual Distribution Requirement, then we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (i.e.,
realized net long-term capital gains in excess of realized net short-term capital losses) we distribute (or are deemed to distribute) to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or
capital gain not distributed (or deemed not distributed) to our stockholders. We will be subject to a 4% nondeductible U.S. federal
excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, and on which we paid no U.S. federal income tax, in preceding years (the Excise Tax Avoidance
Requirement). In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:  

at all times during each taxable year, have in effect an election to be treated as a BDC under the 1940 Act;  

derive in each taxable year at least 90% of our gross income from (a) dividends, interest, payments with
respect to certain securities loans, gains from the sale of stock or other securities or currencies, or other income derived with respect to our business of investing in such stock, securities or currencies and (b) net income derived from an
interest in a qualified publicly traded partnership; and  

diversify our holdings so that at the end of each quarter of the taxable year:  

at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities,
securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and  17




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

no more than 25% of the value of our assets is invested in (i) the securities, other than U.S. government
securities or securities of other RICs, of one issuer, (ii) the securities of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses
or (iii) the securities of one or more qualified publicly traded partnerships. The Regulated
Investment Company Modernization Act of 2010, which was generally effective for 2011 and subsequent tax years, provides some relief from RIC disqualification due to failures of the income and asset diversification requirements, although there
may be additional taxes due in such cases. We may be required to recognize taxable income in circumstances in which we do not receive
cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with
payment-in-kind (PIK) interest or, in certain cases, increasing interest rates or debt instruments issued with warrants), we must include in income each year
a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because any original issue discount accrued will be included in
our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash
amount. Because we may use debt financing, we will be subject to certain asset coverage ratio requirements under the 1940 Act and
financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources or are
otherwise limited in our ability to make distributions, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax. Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things:
(i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary loss or a
deduction into a capital loss (the deductibility of which is more limited); (iv) cause us to recognize income or gain without a corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of securities is
deemed to occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will not be qualifying income for purposes of the 90% gross income test described above. We will monitor
our transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions. Gain or loss
realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. The treatment of such gain or loss as long-term or short-term will
depend on how long we held a particular warrant. Upon the exercise of a warrant acquired by us, our tax basis in the stock purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise
of the warrant. Failure to Qualify as a Regulated Investment Company If we were unable to qualify for treatment as a RIC, we would be subject to U.S. federal income tax on all of our taxable income at regular
corporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Such distributions would be taxable to our stockholders as dividends and, provided certain holding period and other
requirements were met, could qualify for treatment as qualified dividend income in the hands of non-corporate stockholders (and thus eligible for the current 20% maximum rate) to the extent of our
current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends received deduction. Distributions in excess of our current and accumulated earnings and profits
would be treated first as a return of capital to the extent of the  18




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stockholders tax basis, and any remaining distributions would be treated as a capital gain. To requalify as a RIC in a subsequent taxable year, we would be required to satisfy the RIC
qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to qualify as a RIC. Subject to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code for at
least one year prior to disqualification and that requalify as a RIC no later than the second year following the non-qualifying year, we could be subject to tax on any unrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent 5 years, unless we made a special election to pay corporate-level U.S.
federal income tax on such built-in gain at the time of our requalification as a RIC. Investment Advisory Fees Pursuant to an investment advisory and management agreement (the Advisory Agreement), we have agreed to pay Solar Capital
Partners a fee for investment advisory and management services consisting of two componentsa base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.00% of our gross assets. For services rendered under the Advisory Agreement, the
base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters. Base management fees for any partial month or
quarter will be appropriately pro-rated. For purposes of computing the base management fee, gross assets exclude temporary assets acquired at the end of each fiscal quarter for purposes of preserving
investment flexibility in the next fiscal quarter. Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government or government agency securities, repurchase agreements or cash borrowings. The performance-based incentive fee has two parts, as follows: one is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income,
dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies)
accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to Solar Capital Management, and any interest expense and distributions paid on
any issued and outstanding preferred stock, but excluding the performance-based incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt
instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains,
computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end
of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used
to calculate the 1.00% base management fee. We pay Solar Capital Partners an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:  

no performance-based incentive fee in any calendar quarter in which our
pre-incentive fee net investment income does not exceed the hurdle of 1.75%;  

50% of our pre-incentive fee net investment income with respect to that
portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.9167% in any calendar quarter (11.67% annualized). We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle but is less than 2.9167%) as the catch-up. The
catch-up is meant to provide our investment adviser with 20% of our pre-incentive fee net investment income as if a hurdle did not apply if this net
investment income exceeds 2.9167% in any calendar quarter; and  19




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

20% of the amount of our pre-incentive fee net investment income, if any,
that exceeds 2.9167% in any calendar quarter (11.67% annualized) is payable to Solar Capital Partners (once the hurdle is reached and the catch-up is achieved, 20% of all
pre-incentive fee investment income thereafter is allocated to Solar Capital Partners). The following is a graphical representation of the calculation of the income-related portion of the performance-based incentive fee: Quarterly Incentive Fee Based on Net Investment Income Pre-incentive fee net investment income (expressed as a percentage of the value of net assets)  LOGO Percentage of pre-incentive fee net investment income allocated to Solar Capital Partners These calculations are appropriately pro-rated for any period of less than three months. You should be
aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee
hurdle rate and may result in a substantial increase of the amount of incentive fees payable to our investment adviser with respect to pre-incentive fee net investment income. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the
Advisory Agreement, as of the termination date), and equals 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital
depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees with respect to each of the investments in our portfolio. Examples of Quarterly Incentive Fee Calculation Example 1: Income Related Portion of Incentive Fee (*): Alternative 1: Assumptions Investment income (including interest, dividends, fees, etc.) = 1.25% Hurdle rate (1) = 1.75% Management fee (2) = 0.25% Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20% Pre-incentive fee net investment income (investment income  (management fee + other expenses)) = 0.80% Pre-incentive net investment income does not exceed hurdle rate, therefore there is no incentive fee.  20




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Alternative 2: Assumptions Investment
income (including interest, dividends, fees, etc.) = 2.70% Hurdle rate (1) = 1.75% Management fee (2) = 0.25% Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20% Pre-incentive fee net investment income (investment income  (management fee + other expenses)) = 2.25% Incentive fee = 50% × pre-incentive fee net investment income, subject to the catch-up (4) = 50% × (2.25%  1.75%) = 0.25% Alternative 3: Assumptions Investment
income (including interest, dividends, fees, etc.) = 4.00% Hurdle rate (1) = 1.75% Management fee (2) = 0.25% Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20% Pre-incentive fee net investment income (investment income  (management fee + other expenses)) = 3.55% Incentive fee = 20% × pre-incentive fee net investment income, subject to catch-up (4) Incentive fee = 50% ×
catch-up + (20% × (pre-incentive fee net investment income  2.9167%)) Catch-up = 2.9167%  1.75% = 1.1667% Incentive fee = (50%
× 1.1667%) + (20% × (3.55%  2.9167%)) = 0.58334% + (20% × 0.6333%) = 0.58334% + 0.12667% =
0.71001%  21




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(*)
The hypothetical amount of pre-incentive fee net investment income
shown is based on a percentage of total net assets. (1)
Represents 7% annualized hurdle rate. (2)
Represents 1% annualized management fee. (3)
Excludes organizational and offering expenses. (4)
The catch-up provision is intended to provide our
investment adviser with an incentive fee of approximately 20% on all of our pre-incentive fee net investment income as if a hurdle rate did not apply when our net investment income exceeds 2.9167% in any
calendar quarter. Example 2: Capital Gains Portion of Incentive Fee: Alternative 1: Assumptions  

Year 1: $20 million investment made in Company A (Investment A), and $30 million investment
made in Company B (Investment B)  

Year 2: Investment A sold for $50 million and fair market value (FMV) of Investment B determined
to be $32 million  

Year 3: FMV of Investment B determined to be $25 million  

Year 4: Investment B sold for $31 million The capital gains portion of the incentive fee would be:  

Year 1: None  

Year 2: Capital gains incentive fee of $6 million ($30 million realized capital gains on sale of
Investment A multiplied by 20%)  

Year 3: None $5 million cumulative fee (20% multiplied by $25 million ($30 million cumulative capital gains less $5 million cumulative
capital depreciation)) less $6 million (previous capital gains fee paid in Year 2)  

Year 4: Capital gains incentive fee of $200,000 $6.2 million cumulative fee ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (previous capital
gains fee paid in Year 2) Alternative 2: Assumptions  

Year 1: $20 million investment made in Company A (Investment A), $30 million investment
made in Company B (Investment B) and $25 million investment made in Company C (Investment C)  

Year 2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of
Investment C determined to be $25 million  

Year 3: FMV of Investment B determined to be $27 million and Investment C sold for $30 million  

Year 4: FMV of Investment B determined to be $24 million  

Year 5: Investment B sold for $20 million The capital gains incentive fee, if any, would be:  

Year 1: None  

Year 2: $5 million capital gains incentive fee  22




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20% multiplied by $25 million ($30 million realized capital gains on sale of
Investment A less $5 million unrealized capital depreciation on Investment B)  

Year 3: $1.4 million capital gains incentive fee(1) $6.4 million cumulative fee (20% multiplied by $32 million ($35 million cumulative realized capital gains
less $3 million unrealized capital depreciation)) less $5 million (previous capital gains fee paid in Year 2)  

Year 4: None  

Year 5: None $5 million cumulative fee (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital
losses of $10 million)) less $6.4 million (previous cumulative capital gains fee paid in Year 2 and Year 3)  (1)
As illustrated in Year 3 of Alternative 1 above, if Solar Senior Capital were to be wound up on a date other
than December 31 of any year, Solar Senior Capital may have paid aggregate capital gain incentive fees that are more than the amount of such fees that would be payable if Solar Senior Capital had been wound up on December 31 of such year. Payment of Our Expenses All investment professionals of the Investment Adviser and their respective staffs, when and to the extent engaged in providing investment
advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by Solar Capital Partners. We bear all other costs and expenses of our operations and
transactions, including (without limitation):  

the cost of our organization and public offerings;  

the cost of calculating our net asset value, including the cost of any third-party valuation services;  

the cost of effecting sales and repurchases of our shares and other securities;  

interest payable on debt, if any, to finance our investments;  

fees payable to third parties relating to, or associated with, making investments, including fees and expenses
associated with performing due diligence reviews of prospective investments and advisory fees;  

transfer agent and custodial fees;  

fees and expenses associated with marketing efforts;  

federal and state registration fees, any stock exchange listing fees;  

federal, state and local taxes;  

independent directors fees and expenses;  

brokerage commissions;  

fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;  

direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;  

fees and expenses associated with independent audits and outside legal costs;  

costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and
state securities laws; and  23




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

all other expenses incurred by either Solar Capital Management or us in connection with administering our
business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement,
including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and their respective
staffs. Available Information The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is http://www.sec.gov. Our internet address is
www.solarseniorcap.com. We make available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on our website is not
incorporated by reference into this annual report on Form 10-K, and you should not consider information contained on our website to be part of this annual report on
Form 10-K.  Item 1A.
Risk Factors Before you invest in our securities, you should be aware of various risks, including those described below. You should carefully consider
these risk factors, together with all of the other information included in this annual report on Form 10-K, before you decide whether to make an investment in our securities. The risks set out below are not
the only risks we face. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the trading price of our common stock could
decline or the value of our preferred stock, debt securities, subscription rights, or warrants may decline, and you may lose all or part of your investment. Risks Related to Our Investments We operate in a highly competitive market for investment opportunities. A number of entities compete with us to make the types of investments that we target in leveraged companies. We compete with other BDCs, public
and private funds, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are substantially larger and have considerably greater
financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or
different risk assessments than we have, which could allow them to consider a wider variety of investments and establish more relationships and offer better pricing and more flexible structure than we are able to do. Furthermore, many of our
potential competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. If we are unable to source attractive investments, we may hold a greater percentage of our assets in cash and cash equivalents than
anticipated, which could impact potential returns on our portfolio. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result
of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment
objective. Participants in our industry compete on several factors, including price, flexibility in transaction structure, customer
service, reputation, market knowledge and speed in decision-making. We do not seek to compete primarily based on the interest rates we offer, and we believe that some of our competitors may make loans with  24




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interest rates that may be comparable to or lower than the rates we may offer. We may lose investment opportunities if we do not match our competitors pricing, terms and structure. However,
if we match our competitors pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss. Our investments are very risky and highly speculative. We invest primarily in senior secured loans, including first lien, stretch-senior, unitranche and second lien debt instruments, made to
middle-market companies whose debt is rated below investment grade. We may also invest in debt of public companies that are thinly traded or equity securities. Securities rated below investment grade are often referred to as leveraged
loans, high yield or junk securities, and may be considered high risk compared to debt instruments that are rated investment grade. Senior Secured Loans. When we make a senior secured term loan investment, including a first lien, stretch-senior, unitranche or
second lien debt investment, in a portfolio company, we generally take a security interest in the available assets of the portfolio company, including the equity interests of its subsidiaries, which we expect to help mitigate the risk that we will
not be repaid. However, there is a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the
business and market conditions, including as a result of the inability of the portfolio company to raise additional capital, and, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a
portfolio companys financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not
guarantee that we will receive principal and interest payments according to the loans terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies. Equity Investments. When we invest in senior secured loans we may acquire common equity securities as well. In certain
other unique circumstances we may also make equity investments in businesses that exclusively make senior loans, such as our investments in Gemino and NMC. In addition, we may invest directly in the equity securities of portfolio companies without
limitation as to market capitalization. For instance, we may invest in thinly traded companies, the prices of which may be subject to erratic market movement. Our goal is ultimately to exit such equity interests and realize gains upon our
disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on
the disposition of any equity interests may not be sufficient to offset any other losses we experience. In addition, investing in
middle-market companies involves a number of significant risks, including:  

these companies may have limited financial resources and may be unable to meet their obligations under their debt
securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;  

they typically have shorter operating histories, narrower product lines and smaller market shares than larger
businesses, which tend to render them more vulnerable to competitors actions and market conditions, as well as general economic downturns;  

they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the
death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;  

they generally have less predictable operating results, may from time to time be parties to litigation, may be
engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance  25




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expansion or maintain their competitive position. In addition, our executive officers, directors and our investment adviser may, in the ordinary course of business, be named as defendants in
litigation arising from our investments in the portfolio companies; and  

they may have difficulty accessing the capital markets to meet future capital needs, which may limit their
ability to grow or to repay their outstanding indebtedness upon maturity. The lack of liquidity in our
investments may make it difficult for us to dispose of our investments at a favorable price, which may adversely affect our ability to meet our investment objectives. We generally make investments in private companies. We invest and expect to continue investing in companies whose securities have no
established trading market and whose securities are and will be subject to legal and other restrictions on resale or whose securities are and will be less liquid than are publicly-traded securities. Investments purchased by us that are liquid at the
time of purchase may subsequently become illiquid due to events relating to the issuer of the investments, market events, economic conditions or investor perceptions. The illiquidity of our investments may make it difficult for us to sell such
investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. As a result, we do not
expect to achieve liquidity in our investments in the near-term. However, to maintain our qualification as a BDC and as a RIC, we may have to dispose of investments if we do not satisfy one or more of the applicable criteria under the respective
regulatory frameworks. Domestic and foreign markets are complex and interrelated, so that events in one sector of the world markets or economy, or in one geographical region, can reverberate and have materially negative consequences for other
markets, economic or regional sectors in a manner that may not be foreseen and which may negatively impact the liquidity of our investments and materially harm our business. In addition, we may face other restrictions on our ability to liquidate an
investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company. Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of
significant loss if any of these companies performs poorly or defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry. Our portfolio may be concentrated in a limited number of portfolio companies and industries. For example, as of December 31, 2018, our
investments in NMC and Gemino comprised 14.6% and 7.1%, respectively, of our total assets and our investments in diversified financial services and health care providers & services industries comprised 21.7% and 15.5%, respectively, of our
total assets. Beyond the asset diversification requirements associated with our qualification as a RIC under Subchapter M of the Code, we do not have fixed guidelines for diversification, and while we are not targeting any specific industries,
our investments may be concentrated in relatively few industries or portfolio companies. As a result, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write
down the value of any one investment. Additionally, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize. Our investments in securities rated below investment grade are speculative in nature and are subject to additional risk factors such as
increased possibility of default, illiquidity of the security, and changes in value based on changes in interest rates. The
securities that we invest in are typically rated below investment grade. Securities rated below investment grade are often referred to as leveraged loans, high yield or junk securities, and may be considered
high risk compared to debt instruments that are rated investment grade. High yield securities are regarded as having predominantly speculative characteristics with respect to the issuers capacity to pay interest and repay principal
in accordance with the terms of the obligations and involve major risk exposure to adverse conditions. In addition, high yield securities generally offer a higher current yield than that available from higher  26




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grade issues, but typically involve greater risk. These securities are especially sensitive to adverse changes in general economic conditions, to changes in the financial condition of their
issuers and to price fluctuation in response to changes in interest rates. During periods of economic downturn or rising interest rates, issuers of below investment grade instruments may experience financial stress that could adversely affect their
ability to make payments of principal and interest and increase the possibility of default. The secondary market for high yield securities may not be as liquid as the secondary market for more highly rated securities. In addition, many of our debt
investments will not fully amortize during their lifetime, which could result in a loss or a substantial amount of unpaid principal and interest due upon maturity. Price declines and illiquidity in the corporate debt markets have adversely affected, and may continue to adversely affect, the fair
value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation. Any unrealized depreciation that we experience on our loan portfolio may be an indication of future realized losses, which could reduce
our income available for distribution and could adversely affect our ability to service our outstanding borrowings. As a BDC, we
are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our board of directors. Decreases in the market values or fair values of our
investments are recorded as unrealized depreciation. Any unrealized depreciation in our loan portfolio could be an indication of a portfolio companys inability to meet its repayment obligations to us with respect to the affected loans. This
could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods and could materially adversely affect our ability to service our outstanding borrowings. Depending on market
conditions, we could incur substantial losses in future periods, which could further reduce our net asset value and have a material adverse impact on our business, financial condition and results of operations. Global economic, political and market conditions may adversely affect our business, results of operations and financial condition,
including our revenue growth and profitability. The current worldwide financial market situation, as well as various social and
political tensions in the United States and around the world, may contribute to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, and may cause economic uncertainties or deterioration in the
United States and worldwide. The U.S. and global capital markets experienced extreme volatility and disruption during the economic downturn that began in mid-2007, and the U.S. economy was in a
recession for several consecutive calendar quarters during the same period. In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt, which created concerns about the ability of
certain nations to continue to service their sovereign debt obligations. Risks resulting from such debt crisis, including any austerity measures taken in exchange for bailout of certain nations, and any future debt crisis in Europe or any similar
crisis elsewhere could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in certain countries and the financial condition of financial institutions
generally. In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union (Brexit), and, subsequently, on March 29, 2017, the U.K. government began the formal process of leaving the
European Union, which is set to occur on March 29, 2019. Brexit created political and economic uncertainty and instability in the global markets (including currency and credit markets), and especially in the United Kingdom and the European
Union, and this uncertainty and instability may last indefinitely. Because the U.K. Parliament rejected Prime Minister Theresa Mays proposed Brexit deal with the European Union in January 2019, there is increased uncertainty on the timing of
Brexit. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal and monetary policies of
foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets. The Republican Party
currently controls the executive branch and senate portion of the legislative branch of government, which increases the likelihood that legislation may be adopted that could significantly affect the  27




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regulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Wall Street Reform and Consumer Protection Act and the authority of the Federal
Reserve and the Financial Stability Oversight Council. For example, in March 2018, the U.S. Senate passed a bill that eased financial regulations and reduced oversight for certain entities. The United States may also potentially withdraw from or
renegotiate various trade agreements and take other actions that would change current trade policies of the United States. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the
United States. Such actions could have a significant adverse effect on our business, financial condition and results of operations. We cannot predict the effects of these or similar events in the future on the U.S. economy and securities markets or
on our investments. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so. On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, which increased
from $50 billion to $250 billion the asset threshold for designation of systemically important financial institutions or SIFIs subject to enhanced prudential standards set by the Federal Reserve Board, staggering
application of this change based on the size and risk of the covered bank holding company. On May 30, 2018, the Federal Reserve Board voted to consider changes to the Volcker Rule that would loosen compliance requirements for all banks. The
effect of this change and any further rules or regulations are and could be complex and far-reaching, and the change and any future laws or regulations or changes thereto could negatively impact our
operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations. Volatility or a prolonged disruption in the credit markets could materially damage our business. We are required to record our assets at fair value, as determined in good faith by our board of directors, in accordance with our valuation
policy. As a result, volatility in the capital markets may have a material adverse effect on our valuations and our net asset value, even if we hold investments to maturity. Volatility or dislocation in the capital markets may depress our stock
price below our net asset value per share and create a challenging environment in which to raise equity and debt capital. These conditions could continue for a prolonged period of time or worsen in the future. While these conditions persist, we and
other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital. Equity capital may be difficult to raise because, subject to some limited exceptions which apply to us, as a BDC we
are generally not able to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. At our 2018 Annual Stockholders
Meeting, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or prices below the then current net
asset value per share, in each case subject to the approval of our board of directors and compliance with the conditions set forth in the proxy statement pertaining thereto, during a period beginning on October 11, 2018 and expiring on the
earlier of the one-year anniversary of the date of the 2018 Annual Stockholders Meeting and the date of our 2019 Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since our
initial public offering on February 24, 2011, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less than our then current net asset value per share. Any offering of our common stock that requires
stockholder approval must occur, if at all, within one year after receiving such stockholder approval. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset
coverage, as defined in the 1940 Act, must equal at least 150% immediately after each time we incur indebtedness. The debt capital that will be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future.
Any inability to raise capital could have a negative effect on our business, financial condition and results of operations. Additionally,
our ability to incur indebtedness is limited by the asset coverage ratio for a BDC, as defined under the 1940 Act. Declining portfolio values negatively impact our ability to borrow additional funds because  28




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our net asset value is reduced for purposes of the asset coverage ratio. If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratio stipulated by the
1940 Act, which could, in turn, cause us to lose our status as a BDC and materially impair our business operations. A lengthy disruption in the credit markets could also materially decrease demand for our investments. The significant disruption in the capital markets experienced in the past has had, and may in the future have, a negative effect on the
valuations of our investments and on the potential for liquidity events involving our investments. The debt capital that may be available to us in the future may be at a higher cost and have less favorable terms and conditions than those currently
in effect. If our financing costs increase and we have no increase in interest income, then our net investment income will decrease. A prolonged inability to raise capital may require us to reduce the volume of investments we originate and could
have a material adverse impact on our business, financial condition and results of operations. This may also increase the probability that other structural risks negatively impact us. These situations may arise due to circumstances that we may be
unable to control, such as a lengthy disruption in the credit markets, a severe decline in the value of the U.S. dollar, a sharp economic downturn or recession or an operational problem that affects third parties or us, and could materially damage
our business, financial condition and results of operations. If we cannot obtain additional capital because of either regulatory or
market price constraints, we could be forced to curtail or cease our new lending and investment activities, our net asset value could decrease and our level of distributions and liquidity could be affected adversely. Our ability to secure additional financing and satisfy our financial obligations under indebtedness outstanding from time to time will depend
upon our future operating performance, which is subject to the prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of
which are beyond our control. The worsening of current economic and capital market conditions could have a material adverse effect on our ability to secure financing on favorable terms, if at all. If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity
resulting from leverage to the extent that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to our portfolio companies. Uncertainty relating to the LIBOR calculation process may adversely affect the value of our portfolio of the LIBOR-indexed,
floating-rate debt securities. In the recent past, concerns have been publicized that some of the member banks surveyed by the
British Bankers Association (BBA) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in
order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted.
A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are
ongoing. Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined.
Uncertainty as to the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the
determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed,
floating-rate debt securities. For example, On July 27, 2017, the United Kingdoms Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if at that time whether
or not LIBOR will cease to exist or if  29




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new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a
steering committee comprised of large US financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities. The future of LIBOR at this time is
uncertain. If LIBOR ceases to exist, we may need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is
established. Economic recessions or downturns could impair the ability of our portfolio companies to repay loans and harm our
operating results. Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to
repay our loans during these periods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record the values of our
investments. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments at fair value. Economic slowdowns or recessions could lead to financial losses in our portfolio and
a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent
us from increasing investments and result in our receipt of a reduced level of interest income from our portfolio companies and/or losses or charge offs related to our investments, and, in turn, may adversely affect distributable income and have
material adverse effect on our results of operations. A portfolio companys failure to satisfy financial or operating covenants
imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio
companys ability to meet its obligations under the debt that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of
our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided significant managerial assistance to that portfolio company, a bankruptcy court might re-characterize our debt holdings and subordinate all or a portion of our claim to that of other creditors. These portfolio companies may face intense competition, including competition from companies with greater financial resources, more extensive
research and development, manufacturing, marketing and service capabilities and greater number of qualified and experienced managerial and technical personnel. They may need additional financing that they are unable to secure and that we are unable
or unwilling to provide, or they may be subject to adverse developments unrelated to the technologies they acquire. We may suffer a
loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient. In the event of a default by a
portfolio company on a secured loan, we will only have recourse to the assets collateralizing the loan. If the underlying collateral value is less than the loan amount, we will suffer a loss. In addition, we sometimes make loans that are unsecured,
which are subject to the risk that other lenders may be directly secured by the assets of the portfolio company. In the event of a default, those collateralized lenders would have priority over us with respect to the proceeds of a sale of the
underlying assets. In cases described above, we may lack control over the underlying asset collateralizing our loan or the underlying assets of the portfolio company prior to a default and, as a result, the value of the collateral may be reduced by
acts or omissions by owners or managers of the assets. In the event of bankruptcy of a portfolio company, we may not have full recourse
to its assets in order to satisfy our loan, or our loan may be subject to equitable subordination. In addition, certain of our loans are  30




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subordinate to other debt of the portfolio company. If a portfolio company defaults on our loan or on debt senior to our loan, or in the event of a portfolio company bankruptcy, our loan will be
satisfied only after the senior debt receives payment. Where debt senior to our loan exists, the presence of inter-creditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies
(through standstill periods) and control decisions made in bankruptcy proceedings relating to the portfolio company. Bankruptcy and portfolio company litigation can significantly increase collection losses and the time needed for us to
acquire the underlying collateral in the event of a default, during which time the collateral may decline in value, causing us to suffer further losses. If the value of collateral underlying our loan declines or interest rates increase during the term of our loan, a portfolio company may not be
able to obtain the necessary funds to repay our loan at maturity through refinancing. Decreasing collateral value and/or increasing interest rates may hinder a portfolio companys ability to refinance our loan because the underlying collateral
cannot satisfy the debt service coverage requirements necessary to obtain new financing. If a borrower is unable to repay our loan at maturity, we could suffer a loss which may adversely impact our financial performance. The business, financial condition and results of operations of our portfolio companies could be adversely affected by worldwide economic
conditions, as well as political and economic conditions in the countries in which they conduct business. The business and
operating results of our portfolio companies may be impacted by worldwide economic conditions. Although the U.S. economy has in recent years shown signs of recovery from the 20082009 global recession, the strength and duration of any economic
recovery will be impacted by worldwide economic growth. For instance, concerns of economic slowdown in China and other emerging markets and signs of deteriorating sovereign debt conditions in Europe could lead to disruption and instability in the
global financial markets. The significant debt in the United States and European countries is expected to hinder growth in those countries for the foreseeable future. In the future, the U.S. government may not be able to meet its debt payments
unless the federal debt ceiling is raised. If legislation increasing the debt ceiling is not enacted, as needed, and the debt ceiling is reached, the U.S. federal government may stop or delay making payments on its obligations. Any default by the
U.S. government on its obligations or any prolonged U.S. government shutdown could negatively impact the U.S. economy and our portfolio companies. Multiple factors relating to the international operations of some of our portfolio companies and to
particular countries in which they operate could negatively impact their business, financial condition and results of operations. Some of
the products of our portfolio companies are developed, manufactured, assembled, tested or marketed outside the United States. Any conflict or uncertainty in these countries, including due to natural disasters, public health concerns, political
unrest or safety concerns, could harm their business, financial condition and results of operations. In addition, if the government of any country in which their products are developed, manufactured or sold sets technical or regulatory standards for
products developed or manufactured in or imported into their country that are not widely shared, it may lead some of their customers to suspend imports of their products into that country, require manufacturers or developers in that country to
manufacture or develop products with different technical or regulatory standards and disrupt cross-border manufacturing, marketing or business relationships which, in each case, could harm their businesses. Our failure to make follow-on investments in our portfolio companies could impair the value of
our portfolio. Following an initial investment in a portfolio company, we may make additional investments in that portfolio
company as follow-on investments, in order to: (i) increase or maintain in whole or in part our ownership percentage; (ii) exercise warrants, options or convertible securities that were
acquired in the original or subsequent financing; or (iii) attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments or otherwise lack sufficient funds to
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discretion to make any follow-on investments, subject to the availability of capital resources. The failure to make
follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our
participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment
because we may not want to increase our concentration of risk, either because we prefer other opportunities or because we are subject to BDC requirements that would prevent such follow-on investments or the
desire to maintain RIC tax treatment. Where we do not hold controlling equity interests in our portfolio companies, we may not be
in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments. Although we hold controlling equity positions in some of our portfolio companies, we do not currently hold controlling equity positions in the
majority of our portfolio companies. As a result, we are subject to the risk that a portfolio company in which we do not have a controlling interest may make business decisions with which we disagree, and that the management and/or stockholders of
such portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of the investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in
the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments. Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on
equity. We are subject to the risk that the investments we make in our portfolio companies may be prepaid prior to maturity. When
this occurs, we may reduce our borrowings outstanding or reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments, if any, will typically have substantially lower
yields than the debt investment being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt investment that was prepaid. As a
result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a
decline in the market price of our common stock. We may choose to waive or defer enforcement of covenants in the debt securities
held in our portfolio, which may cause us to lose all or part of our investment in these companies. We structure the debt
investments in our portfolio companies to include business and financial covenants placing affirmative and negative obligations on the operation of the companys business and its financial condition. However, from time to time, we may elect to
waive breaches of these covenants, including our right to payment, or waive or defer enforcement of remedies, such as acceleration of obligations or foreclosure on collateral, depending upon the financial condition and prospects of the particular
portfolio company. These actions may reduce the likelihood of our receiving the full amount of future payments of interest or principal and be accompanied by a deterioration in the value of the underlying collateral as many of these companies may
have limited financial resources, may be unable to meet future obligations and may go bankrupt. This could negatively impact our ability to pay distributions, could adversely affect our results of operation and financial condition and cause the loss
of all or part of your investment. Our loans could be subject to equitable subordination by a court which would increase our risk
of loss with respect to such loans. Courts may apply the doctrine of equitable subordination to subordinate the claim or lien of a
lender against a borrower to claims or liens of other creditors of the borrower, when the lender or its affiliates is found to have  32




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engaged in unfair, inequitable or fraudulent conduct. The courts have also applied the doctrine of equitable subordination when a lender or its affiliates is found to have exerted inappropriate
control over a client, including control resulting from the ownership of equity interests in a client. We have made direct equity investments or received warrants in connection with loans. Payments on one or more of our loans, particularly a loan to
a client in which we may also hold an equity interest, may be subject to claims of equitable subordination. If we were deemed to have the ability to control or otherwise exercise influence over the business and affairs of one or more of our
portfolio companies resulting in economic hardship to other creditors of that company, this control or influence may constitute grounds for equitable subordination and a court may treat one or more of our loans as if it were unsecured or common
equity in the portfolio company. In that case, if the portfolio company were to liquidate, we would be entitled to repayment of our loan on a pro-rata basis with other unsecured debt or, if the effect of
subordination was to place us at the level of common equity, then on an equal basis with other holders of the portfolio companys common equity only after all of its obligations relating to its debt and preferred securities had been satisfied. An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available
information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns. We invest primarily in privately held companies. Generally, little public information exists about these companies, and we are required to rely
on the ability of Solar Capital Partners investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies,
we may not make a fully informed investment decision, and we may lose money on our investments. Also, smaller privately held companies frequently have less diverse product lines and smaller market presence than larger competitors. These factors
could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies. Our portfolio companies may incur debt that ranks equally with, or senior to, some of our investments in such companies. We invest primarily in senior secured loans, including second lien, as well as unsecured debt instruments issued by our portfolio companies. If
we invest in second lien, or unsecured debt instruments, our portfolio companies typically may be permitted to incur other debt that ranks equally with, or senior to, such debt instruments. By their terms, such debt instruments may provide that the
holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution,
reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our
investment. In such case, after repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt securities in which we invest, we would
have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. Any such limitations on the ability of
our portfolio companies to make principal or interest payments to us, if at all, may reduce our net asset value and have a negative material adverse impact to our business, financial condition and results of operation. Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments. Our investment strategy contemplates potential investments in debt securities of foreign companies. Investing in foreign companies may expose
us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less
available information than is generally the  33




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case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual
obligations, lack of uniform accounting and auditing standards and greater price volatility. These risks may be more pronounced for portfolio companies located or operating primarily in emerging markets, whose economies, markets and legal systems
may be less developed. Although most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign
currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates,
differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no
assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective. We may expose ourselves
to risks if we engage in hedging transactions. If we engage in hedging transactions, we may expose ourselves to risks associated
with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in
currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such
positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity
for gain if the values of the underlying portfolio positions should increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging
transaction at an acceptable price. The success of our hedging transactions will depend on our ability to correctly predict movements in
currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall
investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being
hedged may vary. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the
intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies
because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations. To the extent we engage in hedging transactions, we also face the risk that counterparties to the derivative instruments we
hold may default, which may expose us to unexpected losses from positions where we believed that our risk had been appropriately hedged. Our investment adviser may not be able to achieve the same or similar returns as those achieved for other funds it currently manages or
by our senior investment professionals while they were employed at prior positions. Our investment adviser manages other funds,
including other BDCs, and may manage other entities in the future. The track record and achievements of these other entities are not necessarily indicative of future results that will be achieved by our investment adviser because these other
entities may have investment objectives and strategies that differ from ours. Additionally, although in the past our senior investment professionals held senior positions at a number of investment firms, their track record and achievements are not
necessarily indicative of future results that will be achieved by our investment adviser. In their roles at such other firms, our senior investment professionals were part of investment teams, and they were not solely responsible for generating
investment ideas. In addition, such investment teams arrived at investment decisions by consensus.  34




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Risks Relating to an Investment in Our Securities Our shares may trade at a substantial discount from net asset value and may continue to do so over the long term. Shares of BDCs may trade at a market price that is less than the net asset value that is attributable to those shares. The possibility that our
shares of common stock will trade at a substantial discount from net asset value over the long term is separate and distinct from the risk that our net asset value will decrease. We cannot predict whether shares of our common stock will trade above,
at or below our net asset value in the future. If our common stock trades below its net asset value, we will generally not be able to issue additional shares or sell our common stock at its market price without first obtaining the approval for such
issuance from our stockholders and our independent directors. At our 2018 Annual Stockholders Meeting, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common
stock immediately prior to each such offering, at a price or prices below the then current net asset value per share, in each case subject to the approval of our board of directors and compliance with the conditions set forth in the proxy statement
pertaining thereto, during a period beginning on October 11, 2018 and expiring on the earlier of the one-year anniversary of the date of the 2018 Annual Stockholders Meeting and the date of our 2019
Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since our initial public offering on February 24, 2011, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less than
our then current net asset value per share. Any offering of our common stock that requires stockholder approval must occur, if at all, within one year after receiving such stockholder approval. If additional funds are not available to us, we could
be forced to curtail or cease our new lending and investment activities, and our net asset value could decrease and our level of distributions could be impacted. Our common stock price may be volatile and may decrease substantially. The trading price of our common stock may fluctuate substantially. The price of our common stock that will prevail in the market may be higher
or lower than the price you pay, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:  

price and volume fluctuations in the overall stock market from time to time;  

investor demand for our shares;  

significant volatility in the market price and trading volume of securities of BDCs or other companies in our
sector, which are not necessarily related to the operating performance of these companies;  

exclusion of our common stock from certain market indices, such as the Russell 2000 Financial Services Index,
which could reduce the ability of certain investment funds to own our common stock and put short-term selling pressure on our common stock;  

changes in regulatory policies or tax guidelines with respect to RICs or BDCs;  

failure to qualify as a RIC, or the loss of RIC tax treatment;  

any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities
analysts;  

changes, or perceived changes, in the value of our portfolio investments;  

departures of Solar Capital Partners key personnel;  

operating performance of companies comparable to us;  

changes in the prevailing interest rates;  

loss of a major funding source; or  

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Our business and operation could be negatively affected if we become subject to any
securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price. In the past, following periods of volatility in the market price of a companys securities, securities class action litigation has often
been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC space recently. While we are currently not subject to any securities litigation or shareholder
activism, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including
potential proxy contests, could result in substantial costs and divert managements and our board of directors attention and resources from our business. Additionally, such securities litigation and shareholder activism could give rise to
perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses
related to any securities litigation and activist shareholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and
shareholder activism. There is a risk that our stockholders may not receive distributions or that our distributions may not grow
over time. We intend to make distributions on a monthly basis to our stockholders out of assets legally available for
distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases
in cash distributions. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. To the extent we make distributions to stockholders which include a return of capital, that portion
of the distribution essentially constitutes a return of the stockholders investment. Although such return of capital may not be taxable, such distributions may increase an investors tax liability for capital gains upon the future sale of
our common stock. As a RIC, if we do not distribute a certain percentage of our income annually, we may suffer adverse tax consequences,
including possibly losing the U.S. federal income tax benefits allowable to RICs. We cannot assure you that you will receive distributions at a particular level or at all. We may choose to pay distributions in our own common stock, in which case our stockholders may be required to pay U.S. federal income
taxes in excess of the cash distributions they receive. We may distribute taxable distributions that are payable in cash or shares
of our common stock at the election of each stockholder. Under certain applicable provisions of the Code and the Treasury regulations, distributions payable of a publicly offered RIC that are in cash or in shares of stock at the election of
stockholders may be treated as taxable distributions. The Internal Revenue Service has issued a revenue procedure indicating that this rule will apply if the total amount of cash to be distributed is not less than 20% of the total distribution.
Under this guidance, if too many stockholders elect to receive their distributions in cash, the cash available for distribution must be allocated among the stockholders electing to receive cash (with the balance of distributions paid in stock). If
we decide to make any distributions consistent with this revenue procedure that are payable in part in our stock, taxable stockholders receiving such distributions will be required to include the full amount of the distribution (whether received in
cash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain distribution) to the extent of our current and accumulated earnings and profits for
U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receives as a distribution in order to pay this
tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to
non-U.S. stockholders, we may be  36




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required to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. If a significant number of our
stockholders determine to sell shares of our stock in order to pay taxes owed on distributions, it may put downward pressure on the trading price of our stock. Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common
stock. The 500,000 shares that were originally issued to Solar Senior Capital Investors LLC in the concurrent private placement in
connection with our initial public offering (the Concurrent Private Placement) pursuant to the exemption from registration provided by Section 4(2) under the Securities Act were subject to a 180 day
lock-up period. Upon expiration of this lock-up period, such shares became generally freely tradable in the public market, subject to the provisions of Rule 144
promulgated under the Securities Act. Sales of substantial amounts of our common stock, or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it
could impair our ability to raise additional capital through the sale of securities should we desire to do so. We have also committed to
file a registration statement to register the resale of the shares of common stock that were issued in the Concurrent Private Placement to Solar Senior Capital Investors LLC within 60 days of receiving a request from Solar Senior Capital Investors
LLC to do so. We have committed to use our commercially reasonable efforts to obtain effectiveness of such registration statement as soon as reasonably practicable after the filing of such registration statement. Assuming effectiveness of such
registration statement, Solar Senior Capital Investors LLC will generally be able to resell its shares of common stock without restriction. Delays in the government budget process or a government shutdown may adversely affect our operations and may prevent us from conducting
a securities offering. Each year, the U.S. Congress must pass all spending bills in the federal budget. If any such spending bill
is not timely passed, a government shutdown will close many federally run operations, which may include those of the SEC, and halt work for federal employees unless they are considered essential or such work is separately funded by industry. If a
government shutdown were to occur, and the SEC were to remain closed for a prolonged period of time, we may not be able to conduct a securities offering. Our ability to raise additional capital through the sale of securities could be materially
affected by any prolonged government shutdown. We may be unable to invest the net proceeds raised from any offerings on acceptable
terms or allocate net proceeds from any offering of our securities in ways with which you may not agree. We cannot assure you that
we will be able to find enough appropriate investments that meet our investment criteria or that any investment we complete using the proceeds from any securities offering will produce a sufficient return. Until we identify new investment
opportunities, we intend to either invest the net proceeds of future offerings in cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less or use the net proceeds from such offerings to
reduce then-outstanding obligations. We have significant flexibility in investing the net proceeds of any offering of our securities and
may use the net proceeds from an offering in ways with which you may not agree or for purposes other than those contemplated at the time of the offering. The net asset value per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at
prices below the then current net asset value per share of our common stock. At our 2018 Annual Stockholders Meeting, our
stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or prices below the then current net asset value per
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approval of our board of directors and compliance with the conditions set forth in the proxy statement pertaining thereto, during a period beginning on October 11, 2018 and expiring on the
earlier of the one-year anniversary of the date of the 2018 Annual Stockholders Meeting and the date of our 2019 Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since our
initial public offering on February 24, 2011, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less than our then current net asset value per share. Any offering of our common stock that requires
stockholder approval must occur, if at all, within one year after receiving such stockholder approval. We may also use newly issued
shares to implement our dividend reinvestment plan, whether our shares are trading at a premium or at a discount to our then current net asset value per share. To the extent we receive the necessary approval, any decision to sell shares of our
common stock below its then current net asset value per share would be subject to the determination by our board of directors that such issuance or sale is in our and our stockholders best interests. If we were to sell shares of our common stock below its then current net asset value per share, such sales would result in an immediate
dilution to the net asset value per share of our common stock. This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in the
stockholders interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such sale. Because the number of shares of common stock that could be so issued and the timing of any issuance is
not currently known, the actual dilutive effect cannot be predicted. Further, if our current stockholders do not purchase any shares to
maintain their percentage interest, regardless of whether such offering is above or below the then current net asset value per share, their voting power will be diluted. For example, if we sell an additional 10% of our common stock at a 5% discount
from net asset value, a stockholder who does not participate in that offering for its proportionate interest will suffer net asset value dilution of up to 0.5% or $5 per $1,000 of net asset value. Similarly, all distributions declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally
automatically reinvested in shares of our common stock. As a result, stockholders that do not participate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to receive distributions in shares of common
stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the
proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the distribution payable to a stockholder. If we issue preferred stock, the net asset value and market value of our common stock may become more volatile. We cannot assure you that the issuance of preferred stock would result in a higher yield or return to the holders of the common stock. The
issuance of preferred stock would likely cause the net asset value and market value of the common stock to become more volatile. If the distribution rate on the preferred stock were to approach the net rate of return on our investment portfolio, the
benefit of leverage to the holders of the common stock would be reduced. If the distribution rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the holders of
common stock than if we had not issued preferred stock. Any decline in the net asset value of our investments would be borne entirely by the holders of common stock. Therefore, if the market value of our portfolio were to decline, the leverage would
result in a greater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greater net asset value decrease would also tend to cause a greater decline in the market
price for the common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings on the preferred stock or, in an extreme case, our current  38




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investment income might not be sufficient to meet the distribution requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order to
fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory
fees if our total return exceeds the distribution rate on the preferred stock. Holders of preferred stock may have different interests than holders of common stock and may at times have disproportionate influence over our affairs. Our board of directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock,
which could convey special rights and privileges to its owners. Under Maryland General Corporation Law and our charter, our board
of directors is authorized to classify and reclassify any authorized but unissued shares of stock into one or more classes of stock, including preferred stock. Prior to issuance of shares of each class or series, the board of directors is required
by Maryland law and our charter to set the preferences, conversion or other rights, voting powers, restrictions, limitations as to other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of
directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our
common stock or otherwise be in their best interest. The cost of any such reclassification would be borne by our existing common stockholders. The issuance of shares of preferred stock convertible into shares of common stock might also reduce the
net income and net asset value per share of our common stock upon conversion, provided, that we will only be permitted to issue such convertible preferred stock to the extent we comply with the requirements of Section 61 of the 1940 Act,
including obtaining common stockholder approval. These effects, among others, could have an adverse effect on your investment in our common stock. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example,
holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a BDC. In addition, the 1940 Act provides that holders of preferred stock are entitled to vote separately from holders of common
stock to elect two preferred stock directors. In the event distributions become two full years in arrears, holders of any preferred stock would have the right to elect a majority of the directors until such arrearage is completely eliminated.
Preferred stockholders also have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes.
Restrictions imposed on the declarations and payment of distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities, might impair our
ability to maintain our qualification for tax treatment as a RIC for U.S. federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our
qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements. To the
extent we use debt or preferred stock to finance our investments, changes in interest rates will affect our cost of capital and net investment income. To the extent we borrow money, or issue preferred stock, to make investments, our net investment income will depend, in part, upon the
difference between the rate at which we borrow funds or pay distributions on preferred stock and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a
material adverse effect on our net investment income in the event we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, except to the extent we issue fixed rate debt or preferred stock, which
could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest
rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.  39




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You should also be aware that a rise in the general level of interest rates can be expected
to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of
incentive fees payable to our investment adviser with respect to our pre-incentive fee net investment income. We may in the future determine to fund a portion of our investments with preferred stock, which would magnify the potential for loss and
the risks of investing in us in a similar way as our borrowings. Preferred stock, which is another form of leverage, has the same
risks to our common stockholders as borrowings because the distributions on any preferred stock we issue must be cumulative. Payment of such distributions and repayment of the liquidation preference of such preferred stock must take preference over
any distributions or other payments to our common stockholders, and preferred stockholders are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference. Risks Relating to Our Business and Structure We are dependent upon Solar Capital Partners key personnel for our future success. We depend on the diligence, skill and network of business contacts of Messrs. Gross and Spohler, who serve as the managing partners of Solar
Capital Partners and who lead Solar Capital Partners investment team. Messrs. Gross and Spohler, together with the other dedicated investment professionals available to Solar Capital Partners, evaluate, negotiate, structure, close and
monitor our investments. Our future success will depend on the diligence, skill, network of business contacts and continued service of Messrs. Gross and Spohler and the other investment professionals available to Solar Capital Partners. We cannot
assure you that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his relationship with us. The loss of Mr. Gross or Mr. Spohler, or any of the other senior investment
professionals who serve on Solar Capital Partners investment team, could have a material adverse effect on our ability to achieve our investment objective as well as on our financial condition and results of operations. In addition, we can
offer no assurance that Solar Capital Partners will remain our investment adviser. The senior investment professionals of Solar Capital
Partners are and may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us, and may have conflicts of interest in allocating their time. We expect that Messrs. Gross and Spohler
will dedicate a significant portion of their time to the activities of Solar Senior Capital; however, they may be engaged in other business activities which could divert their time and attention in the future. Specifically, each of Messrs. Gross and
Spohler serve as Chief Executive Officer and Chief Operating Officer, respectively, of Solar Capital Ltd. and SCP Private Credit Income BDC LLC. Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the
senior investment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. We expect that the principals of our investment adviser will maintain and develop their relationships with financial sponsors, and we will rely
to a significant extent upon these relationships to provide us with potential investment opportunities. If the senior investment professionals of our investment adviser fail to maintain their existing relationships or develop new relationships with
other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom the senior investment professionals of our investment adviser have relationships are not obligated to
provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us. If our investment adviser is unable to source investment opportunities, we may hold a greater
percentage of our assets in cash and cash equivalents than anticipated, which could impact potential returns on our portfolio.  40




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A disruption in the capital markets and the credit markets could negatively affect our
business. As a BDC, we must maintain our ability to raise additional capital for investment purposes. Without sufficient access to
the capital markets or credit markets, we may be forced to curtail our business operations or we may not be able to pursue new business opportunities. Disruptive conditions in the financial industry and the impact of new legislation in response to
those conditions could restrict our business operations and could adversely impact our results of operations and financial condition. If
the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the 1940 Act and our existing credit facilities. Any such failure could result in an event of default and all of our debt being
declared immediately due and payable and would affect our ability to issue senior securities, including borrowings, and pay distributions, which could materially impair our business operations. Our liquidity could be impaired further by an inability
to access the capital markets or to draw on our credit facilities. For example, we cannot be certain that we will be able to renew our existing credit facilities as they mature or to consummate new borrowing facilities to provide capital for normal
operations, including new originations. Reflecting concern about the stability of the financial markets, many lenders and institutional investors have reduced or ceased providing funding to borrowers. This market turmoil and tightening of credit
have led to increased market volatility and widespread reduction of business activity generally. If we are unable to renew or replace our
existing credit facilities and consummate new facilities on commercially reasonable terms, our liquidity will be reduced significantly. If we consummate new facilities but are then unable to repay amounts outstanding under such facilities, and are
declared in default or are unable to renew or refinance these facilities, we would not be able to initiate significant originations or to operate our business in the normal course. These situations may arise due to circumstances that we may be
unable to control, such as inaccessibility to the credit markets, a severe decline in the value of the U.S. dollar, a further economic downturn or an operational problem that affects third parties or us, and could materially damage our business.
Moreover, we are unable to predict when economic and market conditions may become more favorable. Even if such conditions improve broadly and significantly over the long term, adverse conditions in particular sectors of the financial markets could
adversely impact our business. Our financial condition and results of operations will depend on Solar Capital Partners
ability to manage our future growth effectively by identifying, investing in and monitoring companies that meet our investment criteria. Our ability to achieve our investment objective and to grow depends on Solar Capital Partners ability to identify, invest in and monitor
companies that meet our investment criteria. Accomplishing this result on a cost-effective basis is largely a function of Solar Capital Partners structuring of the investment process, its ability to provide competent, attentive and efficient
services to us and its ability to access financing for us on acceptable terms. The investment team of Solar Capital Partners has substantial responsibilities under the Investment Advisory and Management Agreement, and they may also be called upon to
provide managerial assistance to our portfolio companies as the principals of our administrator. In addition, the members of Solar Capital Partners investment team have similar responsibilities with respect to the management of Solar Capital
Ltd.s investment portfolio and SCP Private Credit Income BDC LLCs investment portfolio. Such demands on their time may distract them or slow our rate of investment. In order to grow, we and Solar Capital Partners will need to retain,
train, supervise and manage new investment professionals. However, we can offer no assurance that any such investment professionals will contribute effectively to the work of the investment adviser. Any failure to manage our future growth
effectively could have a material adverse effect on our business, financial condition and results of operations. We may need to
raise additional capital to grow because we must distribute most of our income. We may need additional capital to fund growth in
our investments. We expect to issue equity securities and expect to borrow from financial institutions in the future. A reduction in the availability of new capital could  41




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limit our ability to grow. We must distribute at least 90% of our investment company taxable income to our stockholders to maintain our tax treatment as a RIC. As a result, any such cash earnings
may not be available to fund investment originations. We expect to borrow from financial institutions and issue additional debt and equity securities. If we fail to obtain funds from such sources or from other sources to fund our investments, it
could limit our ability to grow, which may have an adverse effect on the value of our securities. In addition, as a BDC, our ability to borrow or issue additional preferred stock may be restricted if our total assets are less than 150% of our total
borrowings and preferred stock. Any failure on our part to maintain our status as a BDC would reduce our operating flexibility and
we may be limited in our investment choices as a BDC. The 1940 Act imposes numerous constraints on the operations of BDCs. For
example, BDCs are required to invest at least 70% of their total assets in specified types of securities, primarily in private companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and other high
quality debt investments that mature in one year or less. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private
litigants. In addition, upon approval of a majority of our stockholders, we may elect to withdraw our status as a BDC. If we decide to withdraw our election, or if we otherwise fail to qualify, or maintain our qualification, as a BDC, we may be
subject to the substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with such regulations would significantly decrease our operating flexibility, and could
have a material adverse effect on our business, financial condition and results of operations. Regulations governing our operation
as a BDC affect our ability to, and the way in which we will, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage. In order to satisfy the tax requirements applicable to a RIC, to avoid payment of excise taxes and to minimize or avoid payment of income
taxes, we intend to distribute to our stockholders substantially all of our ordinary income and realized net capital gains except for certain realized net long-term capital gains, which we may retain, pay applicable income taxes with respect thereto
and elect to treat as deemed distributions to our stockholders. We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as senior securities, up to
the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we had been permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of gross
assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. However, our stockholders have approved a resolution permitting us to be subject to a 150% asset coverage ratio effective as
of October 12, 2018. If the value of our assets declines, we may be unable to satisfy the asset coverage test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a
portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior
securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. In addition, because our management fee is calculated as a percentage of our gross assets, which includes any borrowings for
investment purposes, the management fee expenses will increase if we incur additional indebtedness. As of December 31, 2018, we had
$119.2 million outstanding under our senior secured revolving credit facility (the Credit Facility) and $51.4 million outstanding under our FLLP credit facility (the FLLP Facility). If we issue preferred stock, the
preferred stock would rank senior to common stock in our capital structure, preferred stockholders would generally vote together with common stockholders but would have separate voting rights on certain matters and might have other
rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium
price for holders of our common stock or otherwise be in your best interest.  42




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We are not generally able to issue and sell our common stock at a price below net asset
value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our board of directors determines that such sale
is in the best interests of Solar Senior Capital and its stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of
our board of directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for,
our common stock, then the percentage ownership of our stockholders at that time will decrease, and you might experience dilution. This dilution would occur as a result of a proportionately greater decrease in a stockholders interest in our
earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Because the number of future shares of common stock that may be issued below our net asset value per share and the price and timing of such
issuances are not currently known, we cannot predict the actual dilutive effect of any such issuance. We cannot determine the resulting reduction in our net asset value per share of any such issuance. We also cannot predict whether shares of our
common stock will trade above, at or below our net asset value. At our 2018 Annual Stockholders Meeting, our stockholders approved our
ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or prices below the then current net asset value per share, in each case
subject to the approval of our board of directors and compliance with the conditions set forth in the proxy statement pertaining thereto, during a period beginning on October 11, 2018 and expiring on the earlier of the one-year anniversary of the date of the 2018 Annual Stockholders Meeting and the date of our 2019 Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since our initial public offering on
February 24, 2011, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less than our then current net asset value per share. Any offering of our common stock that requires stockholder approval must
occur, if at all, within one year after receiving such stockholder approval. Our credit ratings may not reflect all risks of an
investment in our debt securities. Our credit ratings are an assessment by third parties of our ability to pay our obligations.
Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other
factors discussed above on the market value of or trading market for the publicly issued debt securities. Our stockholders may
experience dilution in their ownership percentage if they do not participate in our dividend reinvestment plan. All distributions
declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally automatically reinvested in shares of our common stock. In the event we issue new shares in connection with our dividend reinvestment
plan, our stockholders that do not elect to receive distributions in shares of common stock may experience dilution in their ownership percentage over time as a result of such issuance. We have and may continue to borrow money, which would magnify the potential for loss on amounts invested and may increase the risk of
investing in us. We borrow money as part of our business plan. Borrowings, also known as leverage, magnify the potential for loss
on amounts invested and, therefore, increase the risks associated with investing in our securities. As of December 31, 2018, we had $119.2 million outstanding under the Credit Facility and $51.4 million outstanding under the FLLP
Facility. We may borrow from and issue senior debt securities to banks, insurance companies and other lenders in the future. Lenders of these senior securities, including the Credit Facility and the FLLP Facility, will have fixed dollar claims on
our assets that are superior to the claims of our common stockholders,  43




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and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause net asset value to decline more
sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affect our ability to make
distribution payments on our common stock. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic
conditions and competitive pressures. Moreover, as the management fee payable to our investment adviser, Solar Capital Partners, will be payable based on our gross assets, including those assets acquired through the use of leverage, Solar Capital
Partners will have a financial incentive to incur leverage which may not be consistent with our stockholders interests. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage,
including any increase in the management fee payable to Solar Capital Partners. As a BDC, we generally had been required to meet a
coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%. However, our stockholders have approved a resolution
permitting us to be subject to a 150% asset coverage ratio effective as of October 12, 2018. Even though we are subject to a 150% asset coverage ratio effective as of October 12, 2018, contractual leverage limitations under our existing
credit facility or future borrowings may limit our ability to incur additional indebtedness. Some of our wholly and substantially owned portfolio companies, including NMC and Gemino, may incur significantly more leverage than we can but we do not
consolidate NMC and Gemino and their leverage is non-recourse to us. Additionally, our credit facilities require us to comply with certain financial and other restrictive covenants, including maintaining an
asset coverage ratio of at least 150% at any time. Failure to maintain compliance with these covenants could result in an event of default and all of our debt being declared immediately due and payable. If this ratio declines below 150%, we may not
be able to incur additional debt and could be required by law to sell a portion of our investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make
distributions. The amount of leverage that we employ will depend on our investment advisers and our board of directors assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be
able to obtain credit at all or on terms acceptable to us. In addition, our credit facilities impose, and any other debt facility into
which we may enter would likely impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to
maintain RIC tax treatment under Subchapter M of the Code. The debt securities that we may issue will be governed by an indenture or
other instrument containing covenants restricting our operating flexibility. We, and indirectly our stockholders, bear the cost of issuing and servicing such debt securities. Any convertible or exchangeable securities that we issue in the future may
have rights, preferences and privileges more favorable than those of our common stock. Illustration. The following table
illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on our total assets, net of interest expense. The calculations in the table below are hypothetical and actual returns may be higher
or lower than those appearing in the table below.  Assumed total return(net of interest expense)(10)%


(5)%


0%


5%


10%Corresponding return to stockholder(1)


(20.4
)%


(11.6
)%


(2.8
)%


6.0
%


14.8
%  (1)
Assumes $459.3 million in total assets and $170.6 million in total debt outstanding, which reflects
our total assets and total debt outstanding as of December 31, 2018, and a cost of funds of 4.30%. Excludes  44




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non-leverage related expenses. In order for us to cover our annual interest payments on our outstanding indebtedness at December 31, 2018, we must
achieve annual returns on our December 31, 2018 total assets of at least 1.6%. It is likely that the terms of
any current or future long-term or revolving credit or warehouse facility we may enter into in the future could constrain our ability to grow our business. Our current lenders have, and any future lender or lenders may have, fixed dollar claims on our assets that are senior to the claims of our
stockholders and, thus, will have a preference over our stockholders with respect to our assets in the collateral pool. Our credit facilities and borrowings also subject us to various financial and operating covenants, including, but not limited to,
maintaining certain financial ratios and minimum tangible net worth amounts. Future credit facilities and borrowings will likely subject us to similar or additional covenants. In addition, we may grant a security interest in our assets in connection
with any such credit facilities and borrowings. Our credit facilities generally contain customary default provisions such as a minimum
net worth amount, a profitability test, and a restriction on changing our business and loan quality standards. In addition, our credit facilities require the repayment of all outstanding debt on the maturity which may disrupt our business and
potentially the business of our portfolio companies that are financed through our credit facilities. An event of default under our credit facilities would likely result, among other things, in termination of the availability of further funds under
our credit facilities and accelerated maturity dates for all amounts outstanding under our credit facilities, which would likely disrupt our business and, potentially, the business of the portfolio companies whose loans we finance through our credit
facilities. This could reduce our revenues and, by delaying any cash payment allowed to us under our credit facilities until the lender has been paid in full, reduce our liquidity and cash flow and impair our ability to grow our business and
maintain RIC tax treatment. The terms of future available financing may place limits on our financial and operation flexibility. If we
are unable to obtain sufficient capital in the future, we may be forced to reduce or discontinue our operations, not be able to make new investments, or otherwise respond to changing business conditions or competitive pressures. Recent legislation may allow us to incur additional leverage, which could increase the risk of investing in the Company. The 1940 Act had generally been prohibiting us from incurring indebtedness unless immediately after such borrowing we had an asset coverage for
total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our total assets). However, on March 23, 2018, the Small Business Credit Availability Act (the SBCA) was signed into law, which included
various changes to regulations under the federal securities laws that impact BDCs. The SBCA included changes to the 1940 Act to allow BDCs to decrease their asset coverage requirement from 200% to 150% (i.e. the amount of debt may not exceed 66.7%
of the value of our total assets), if certain requirements are met. On August 2, 2018, our board of directors, including a required majority (as such term is defined in Section 57(o) of the 1940 Act) approved the
application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCA and recommended the submission of a proposal for stockholders to approve the application of the 150% minimum asset
coverage ratio to us at our annual meeting of stockholders, which was held on October 11, 2018. The stockholder proposal was approved by the required votes of our stockholders at such annual meeting of stockholders, and thus we became subject
to the 150% minimum asset coverage ratio on October 12, 2018. Changing the asset coverage ratio permits us to double our leverage, which results in increased leverage risk and increased expenses. As a result of the SBCA, and of us obtaining the necessary stockholder approval, we are able to increase our leverage up to an amount that
reduces our asset coverage ratio from 200% to 150%. Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to  45




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partially finance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases, then leveraging would cause the net asset value
attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we
not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would
cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay common stock dividends, scheduled debt payments or other payments related to our securities.
Leverage is generally considered a speculative investment technique. Our quarterly and annual operating results are subject to
fluctuation as a result of the nature of our business, and if we fail to achieve our investment objective, the net asset value of our common stock may decline. We could experience fluctuations in our quarterly and annual operating results due to a number of factors, some of which are beyond our
control, including, but not limited to, the interest rate payable on the debt securities that we acquire, the default rate on such securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized
gains or losses, changes in our portfolio composition, the degree to which we encounter competition in our markets, market volatility in our publicly traded securities and the securities of our portfolio companies, and general economic conditions.
As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods. In addition, any of these factors could negatively impact our ability to achieve our investment objectives, which
may cause our net asset value of our common stock to decline. Our investments may be in portfolio companies that may have limited
operating histories and financial resources. Our portfolio companies compete with larger, more established companies with greater
access to, and resources for, further development in these new technologies. We also expect that our portfolio will continue to consist of investments that may have relatively limited operating histories. These companies may be particularly
vulnerable to U.S. and foreign economic downturns, such as the U.S. recession that began in mid-2007 and the European financial crisis, may have more limited access to capital and higher funding costs, may
have a weaker financial position and may need more capital to expand or compete. These businesses also may experience substantial variations in operating results. They may face intense competition, including from companies with greater financial,
technical and marketing resources. Furthermore, some of these companies do business in regulated industries and could be affected by changes in government regulation. Accordingly, these factors could impair their cash flow or result in other events,
such as bankruptcy, which could limit their ability to repay their obligations to us, and may adversely affect the return on, or the recovery of, our investment in these companies. We cannot assure you that any of our investments in our portfolio
companies will be successful. Therefore, we may lose our entire investment in any or all of our portfolio companies. There will be
uncertainty as to the value of our portfolio investments, which may impact our net asset value. A large percentage of our
portfolio investments are in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. We value these securities and the FLLP Facility on a
quarterly basis in accordance with our valuation policy, which is at all times consistent with GAAP. Our board of directors utilizes the services of third-party valuation firms to aid it in determining the fair value of material assets. The board of
directors discusses valuations and determines the fair value in good faith based on the input of our investment adviser and, when utilized, the respective third-party valuation firms. The factors that may be considered in fair value pricing our
investments include the nature and realizable value of any collateral, the portfolio companys ability to make payments and its earnings, the  46




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markets in which the portfolio company does business, comparisons to publicly traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly
valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been
used if a ready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the
disposal of such securities. Our equity ownership in a portfolio company may represent a control investment. Our ability to exit an
investment in a timely manner because we are in a control position or have access to inside information in the portfolio company could result in a realized loss on the investment. If we obtain a control investment in a portfolio company our ability to divest ourselves from a debt or equity investment could be restricted
due to illiquidity in a private stock, limited trading volume on a public companys stock, inside information on a companys performance, insider blackout periods, or other factors that could prohibit us from disposing of the investment as
we would if it were not a control investment. Additionally, we may choose not to take certain actions to protect a debt investment in a control investment portfolio company. As a result, we could experience a decrease in the value of our portfolio
company holdings and potentially incur a realized loss on the investment. There are significant potential conflicts of interest,
including Solar Capital Partners management of other investment funds such as Solar Capital Ltd. and SCP Private Credit Income BDC LLC, which could impact our investment returns, and an investment in Solar Senior Capital is not an investment
in Solar Capital Ltd. or SCP Private Credit Income BDC LLC. Our executive officers and directors, as well as the current and
future partners of our investment adviser, Solar Capital Partners, may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do. For example, Solar Capital Partners, presently serves as
the investment adviser to Solar Capital, a publicly-traded BDC, and SCP Private Credit Income BDC LLC, a private BDC. In addition, Michael S. Gross, our Chairman, Chief Executive Officer and President, Bruce Spohler, our Chief Operating Officer and
board member, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for Solar Capital Ltd. and SCP Private Credit Income BDC LLC. Accordingly, they may have obligations to investors in those entities, the fulfillment
of which obligations might not be in the best interests of us or our stockholders. In addition, we note that any affiliated investment vehicle formed in the future, and managed by our investment adviser or its affiliates may, notwithstanding
different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, Solar Capital Partners may face conflicts in allocating
investment opportunities between us and such other entities. Although Solar Capital Partners will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that, in the future, we may not be given the opportunity
to participate in investments made by investment funds managed by our investment adviser or an investment manager affiliated with our investment adviser. In any such case, when Solar Capital Partners identifies an investment, it will be forced to
choose which investment fund should make the investment. As a BDC, we were substantially limited in our ability to co-invest in privately negotiated transactions with affiliated funds until we obtained an exemptive order from the SEC on July 28, 2014 (the Prior Exemptive Order). The Prior Exemptive Order
permitted us to participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is Solar Capital Partners, in a manner consistent with our investment objective,
positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions to the Prior Exemptive Order. On June 13, 2017, the Company, Solar Capital Ltd., and Solar Capital
Partners received an exemptive order (the New Exemptive Order) for a co-investment order that supersedes the Prior Exemptive Order and extends the relief granted in the Prior Exemptive Order such
that it no longer applies to certain affiliates only if their respective investment adviser is  47




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Solar Capital Partners, but also applies to certain affiliates whose investment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital
Partners and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The terms of the New Exemptive Order are otherwise substantially similar to the Prior Exemptive Order. If we are unable to rely on the New
Exemptive Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent
with more than one entitys investment strategy, on an alternating basis. Although our investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, we and our common stockholders could be adversely
affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of our investment adviser. Solar Capital Partners and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more
of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Solar
Capital Partners allocation procedures. Related party transactions may occur among Solar Senior Capital, Gemino and NMC. These
transactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Gemino or NMC. In
the ordinary course of our investing activities, we pay management and incentive fees to Solar Capital Partners and reimburse Solar Capital Partners for certain expenses it incurs. As a result, investors in our common stock will invest on a
gross basis and receive distributions on a net basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of
Solar Capital Partners has interests that differ from those of our stockholders, giving rise to a conflict. We have entered into a
royalty-free license agreement with our investment adviser, pursuant to which our investment adviser has granted us a non-exclusive license to use the name Solar Capital. Under the License
Agreement, we have the right to use the Solar Capital name for so long as Solar Capital Partners or one of its affiliates remains our investment adviser. In addition, we pay Solar Capital Management, an affiliate of Solar Capital
Partners, our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance
functions, and our allocable portion of the compensation of our chief financial officer and their respective staffs. These arrangements create conflicts of interest that our board of directors must monitor. Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited. The SEC has proposed a new rule under the 1940 Act that would govern the use of derivatives (defined to include any swap, security-based swap,
futures contract, forward contract, option or any similar instrument) as well as financial commitment transactions (defined to include reverse repurchase agreements, short sale borrowings and any firm or standby commitment agreement or similar
agreement) by BDCs. Under the proposed rule, a BDC would be required to comply with one of two alternative portfolio limitations and manage the risks associated with derivatives transactions and financial commitment transactions by segregating
certain assets. Furthermore, a BDC that engages in more than a limited amount of derivatives transactions or that uses complex derivatives would be required to establish a formalized derivatives risk management program. If the SEC adopts this rule
in the form proposed, our ability to enter into transactions involving such instruments may be hindered, which could have an adverse effect on our business, financial condition and results of operations.  48




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We may be obligated to pay our investment adviser incentive compensation even if we
incur a loss. Our investment adviser will be entitled to incentive compensation for each fiscal quarter in an amount equal to a
percentage of the excess of our pre-incentive fee net investment income for that quarter (before deducting incentive compensation) above a performance threshold for that quarter. Accordingly, since the
performance threshold is based on a percentage of our net asset value, decreases in our net asset value make it easier to achieve the performance threshold. Our pre-incentive fee net investment income for
incentive compensation purposes excludes realized and unrealized capital losses or depreciation that we may incur in the fiscal quarter, even if such capital losses or depreciation result in a net loss on our statement of operations for that
quarter. Thus, we may be required to pay Solar Capital Partners incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter. Our incentive fee may induce Solar Capital Partners to pursue speculative investments. The incentive fee payable by us to Solar Capital Partners may create an incentive for Solar Capital Partners to pursue investments on our
behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to our investment adviser is calculated based on a percentage of our return on invested capital. This may
encourage our investment adviser to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of our common stock. In addition, our
investment adviser receives the incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive fee based on income, there is no hurdle rate applicable to the portion of the incentive fee based
on net capital gains. As a result, our investment adviser may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing
in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns. The incentive fee payable by us to our investment adviser also may induce Solar Capital Partners to invest on our behalf in instruments that
have a deferred interest feature, even if such deferred payments would not provide cash necessary to enable us to pay current distributions to our stockholders. Under these investments, we would accrue interest over the life of the investment but
would not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, includes accrued interest. Thus, a portion of this incentive fee would be
based on income that we have not received in cash. In addition, the catch-up portion of the incentive fee may encourage Solar Capital Partners to accelerate or defer interest payable by portfolio
companies from one calendar quarter to another, potentially resulting in fluctuations in timing and distribution amounts. We may invest,
to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, will bear our ratable share of any such investment companys expenses, including
management and performance fees. We will also remain obligated to pay management and incentive fees to Solar Capital Partners with respect to the assets invested in the securities and instruments of other investment companies. With respect to each
of these investments, each of our stockholders will bear his or her share of the management and incentive fee of Solar Capital Partners as well as indirectly bearing the management and performance fees and other expenses of any investment companies
in which we invest. We may become subject to corporate-level U.S. federal income tax if we are unable to qualify and maintain our
qualification for tax treatment as a regulated investment company under Subchapter M of the Code. Although we have elected to be
treated as a RIC under Subchapter M of the Code, no assurance can be given that we will continue to be able to qualify for and maintain RIC tax treatment. To maintain RIC tax  49




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treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements.  

The Annual Distribution Requirement for a RIC will be satisfied if we distribute to our stockholders on an annual
basis at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we may use debt financing, we are subject to certain asset coverage ratio requirements under
the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other
sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.  

The income source requirement will be satisfied if we obtain at least 90% of our income for each year from
certain passive investments, including interest, dividends gains from the sale of stock or securities or similar sources.  

The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at
the end of each quarter of our taxable year. Failure to meet those requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC tax treatment. Because most of our investments will be in private
companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses. If we fail to qualify for RIC tax treatment for any reason and become subject to corporate income tax, the resulting corporate taxes could
substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure could have a material adverse effect on us, the net asset value of our common stock and the total return, if
any, obtainable from your investment in our common stock. Any net operating losses that we incur in periods during which we qualify as a RIC will not offset net capital gains (i.e., net realized long-term capital gains in excess of net realized
short-term capital losses) that we are otherwise required to distribute, and we cannot pass such net operating losses through to our stockholders. In addition, net operating losses that we carry over to a taxable year in which we qualify as a RIC
normally cannot offset ordinary income or capital gains. We may have difficulty satisfying the Annual Distribution
Requirement in order to qualify and maintain RIC tax treatment if we recognize income before or without receiving cash representing such income. In accordance with GAAP and tax requirements, we include in income certain amounts that we have not yet received in cash, such as contractual
PIK interest, which represents contractual interest added to a loan balance and due at the end of such loans term. In addition to the cash yields received on our loans, in some instances, certain loans may also include any of the following: end-of-term payments, exit fees, balloon payment fees or prepayment fees. The increases in loan balances as a result of contractual PIK arrangements are included in income for
the period in which such PIK interest was accrued, which is often in advance of receiving cash payment, and are separately identified on our statements of cash flows. We also may be required to include in income certain other amounts prior to
receiving the related cash. Any warrants that we receive in connection with our debt investments will generally be valued as part of the
negotiation process with the particular portfolio company. As a result, a portion of the aggregate purchase price for the debt investments and warrants will be allocated to the warrants that we receive. This will generally result in original
issue discount for U.S. federal income tax purposes, which we must recognize as ordinary income, increasing the amount that we are required to distribute to qualify for the U.S. federal income tax benefits applicable to RICs. Because these
warrants generally will not produce distributable cash for us at the same time as we are required to make distributions in respect of the related original issue discount, we would need to obtain cash from other sources or to pay a portion of our
distributions using shares of newly issued common stock, consistent with Internal Revenue Service requirements, to satisfy the Annual Distribution and Excise Tax Avoidance requirements.  50




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Other features of the debt instruments that we hold may also cause such instruments to
generate an original issue discount, resulting in a distribution requirement in excess of current cash interest received. Since in certain cases we may recognize income before or without receiving cash representing such income, we may have
difficulty meeting the RIC tax requirement to distribute at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Under such circumstances, we may have to sell some
of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are unable to obtain cash from other sources and are
otherwise unable to satisfy such distribution requirements, we may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax on all our income. The higher yields and interest rates on PIK securities reflects the payment deferral and increased credit risk associated with such
instruments and that such investments may represent a significantly higher credit risk than coupon loans. PIK securities may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the
deferred payments and the value of any associated collateral. PIK interest has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK interest also increases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to our investment adviser based on
non-cash accruals that ultimately may not be realized, but our investment adviser will be under no obligation to reimburse the Company for these fees. Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse
impact on the price of our common stock. The Maryland General Corporation Law and our charter and bylaws contain provisions that
may discourage, delay or make more difficult a change in control of Solar Senior Capital or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicable requirements of the 1940 Act. Our board of
directors has adopted a resolution exempting from the Maryland Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our board of directors, including approval by
a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our board of directors does not approve a business combination, the Maryland Business Combination Act may discourage third parties from
trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act (the Control Share Act) acquisitions of our stock by any person. If we amend our
bylaws to repeal the exemption from the Control Share Act, the Control Share Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. However, we will amend our
bylaws to be subject to the Control Share Act only if our board of directors determines that it would be in our best interests and if the SEC staff does not object to our determination that our being subject to the Control Share Act does not
conflict with the 1940 Act. The SEC staff has issued informal guidance setting forth its position that certain provisions of the Control Share Act would, if implemented, violate Section 18(i) of the 1940 Act. We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter
classifying our board of directors in three classes serving staggered three-year terms, and authorizing our board of directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares
of our stock and , to amend our charter without stockholder approval to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or
prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders. The foregoing provisions
are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our board of  51




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directors. However, these provisions may deprive a stockholder of the opportunity to sell such stockholders shares at a premium to a potential acquirer. We believe that the benefits of
these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation of such proposals may improve their terms. Our board of directors has considered both the positive and
negative effects of the foregoing provisions and determined that they are in the best interest of our stockholders. The failure in
cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively. The occurrence of a disaster, such as a cyber-attack against us or against a third-party that has access to our data or networks, a natural
catastrophe, an industrial accident, failure of our disaster recovery systems, or consequential employee error, could have an adverse effect on our ability to communicate or conduct business, negatively impacting our operations and financial
condition. This adverse effect can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of our data. We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures,
our computer systems, networks, and data, like those of other companies, could be subject to cyber-attacks and unauthorized access, use, alteration, or destruction, such as from physical and
electronic break-ins or unauthorized tampering. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary, and other information processed, stored in, and
transmitted through our computer systems and networks. Such an attack could cause interruptions or malfunctions in our operations, which could result in financial losses, litigation, regulatory penalties, client dissatisfaction or loss, reputational
damage, and increased costs associated with mitigation of damages and remediation. If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive
information, including nonpublic personal information related to stockholders (and their beneficial owners) and material nonpublic information. The systems we have implemented to manage risks relating to these types of events could prove to be
inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information. Breaches such as those involving covertly introduced malware, impersonation of
authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. The failure of these
systems or of disaster recovery plans for any reason could cause significant interruptions in our and our Advisers operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal
information relating to stockholders, material nonpublic information and other sensitive information in our possession. A disaster or a
disruption in the infrastructure that supports our business, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, could have a
material adverse impact on our ability to continue to operate our business without interruption. Our disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and
other safeguards might only partially reimburse us for our losses, if at all. Third parties with which we do business may also be sources
of cybersecurity or other technological risk. We outsource certain functions and these relationships allow for the storage and processing of our information, as well as client, counterparty, employee, and borrower information. While we engage in
actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure, destruction, or other cybersecurity incident that affects our data, resulting in increased costs and other consequences as
described above.  52




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We can be highly dependent on information systems and systems failures could
significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions. Our business is highly dependent on our and third parties communications and information systems. Any failure or interruption of those
systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems
and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:  

sudden electrical or telecommunications outages;  

natural disasters such as earthquakes, tornadoes and hurricanes;  

events arising from local or larger scale political or social matters, including terrorist acts; and  

cyber-attacks. These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common
stock and our ability to pay distributions to our stockholders. Our board of directors may change our investment objective,
operating policies and strategies without prior notice or stockholder approval. Our board of directors has the authority to modify
or waive certain of our operating policies and strategies without prior notice (except as required by the 1940 Act) and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease
to be, or withdraw our election as a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock. Nevertheless, the effects may adversely affect
our business and impact our ability to make distributions. Our business is subject to increasingly complex corporate governance,
public disclosure and accounting requirements that could adversely affect our business and financial results. We are subject to
changing rules and regulations of federal and state government as well as the stock exchange on which our common stock is listed. These entities, including the Public Company Accounting Oversight Board, the SEC and the NASDAQ Stock Market, have
issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additional regulations and requirements in response to laws enacted by Congress. Our efforts
to comply with these existing requirements, or any revised or amended requirements, have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of managements time from other business activities. Changes in laws or regulations governing our operations may adversely affect our business. Changes in the laws or regulations, or the interpretations of the laws and regulations, which govern BDCs, RICs or non-depository commercial lenders could significantly affect our operations and our cost of doing business. We are subject to federal, state and local laws and regulations and are subject to judicial and
administrative decisions that affect our operations, including our loan originations, maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures, and
other trade practices. If these laws, regulations or decisions change, or if we expand our business into jurisdictions that have adopted more stringent requirements than those in which we currently conduct business, then we may have to incur
significant expenses in order to comply or we may have to restrict  53




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our operations. In addition, if we do not comply with applicable laws, regulations and decisions, then we may lose licenses needed for the conduct of our business and be subject to civil fines
and criminal penalties, any of which could have a material adverse effect upon our business results of operations or financial condition. Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of
operations. The current administration has called for significant changes to U.S. trade, healthcare, immigration, foreign and
government regulatory policy. In this regard, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels. Recent events have created a climate of
heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and political risks with potentially
far-reaching implications. There has been a corresponding meaningful increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes and fiscal and monetary policy. To
the extent the U.S. Congress or the current administration implements changes to U.S. policy, those changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes,
healthcare, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business, financial condition, operating results and cash flows.
Until we know what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them. We cannot predict how tax reform legislation will affect us, our investments, or our stockholders, and any such legislation could
adversely affect our business. Legislative or other actions relating to taxes could have a negative effect on us. The rules
dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. In December 2017, the U.S. House of Representatives and U.S.
Senate passed tax reform legislation, which the President signed into law. Such legislation has made many changes to the Code, including significant changes to the taxation of business entities, the deductibility of interest expense, and the tax
treatment of capital investment. We cannot predict with certainty how any changes in the tax laws might affect us, our stockholders, or our portfolio investments. New legislation and any U.S. Treasury regulations, administrative interpretations or
court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our stockholders of such qualification, or could have
other adverse consequences. Stockholders are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our securities. Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm
us. There has been ongoing discussion and commentary regarding potential significant changes to United States trade policies,
treaties and tariffs. The current administration, along with Congress, has created significant uncertainty about the future relationship between the United States and other countries with respect to the trade policies, treaties and tariffs. These
developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between
the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies access to suppliers or customers and have a material adverse effect on their business, financial condition
and results of operations, which in turn would negatively impact us.  54




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Our investment adviser can resign on 60 days notice, and we may not be able to
find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations. Our investment adviser has the right, under the Advisory Agreement, to resign at any time upon 60 days written notice, whether we have
found a replacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within
60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected
and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of
executives having the expertise possessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our
investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.  Item 1B.
Unresolved Staff Comments None.  Item 2.
Properties Our executive offices are located at 500 Park Avenue, New York, New York 10022, and are provided by Solar Capital Management in accordance with
the terms of the Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.  Item 3.
Legal Proceedings We and our consolidated subsidiaries are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal
proceeding threatened against us or our consolidated subsidiaries. From time to time, we and our consolidated subsidiaries may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the
enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition
or results of operations.  Item 4.
Mine Safety Disclosures Not applicable.  55




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PART II  Item 5.
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities Common Stock Our common stock is traded on the NASDAQ Global Select Market under the symbol SUNS. Shares of BDCs may trade at a market price
that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term are separate and distinct from the
risk that our net asset value will decrease. Since our initial public offering on February 24, 2011, our shares of common stock have traded at both a discount and a premium to the net assets attributable to those shares. As of February 15,
2019, we had 4 stockholders of record. DISTRIBUTIONS Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Future quarterly
distributions, if any, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable
return of capital, if any, as applicable. We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax
treatment, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we
currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future
decide to retain such capital gains for investment. We maintain an opt out dividend reinvestment plan for our common
stockholders. As a result, if we declare a distribution, then stockholders cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically opt out of the dividend reinvestment
plan so as to receive cash distributions. We may not be able to achieve operating results that will allow us to make distributions at a
specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions.
Also, our revolving credit facilities may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including
possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations, we include in income certain amounts that we have not yet
received in cash, such as contractual payment-in-kind interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan
term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company
taxable income to obtain tax benefits as a regulated investment company. With respect to the distributions to stockholders, income from
origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders. We cannot assure stockholders that they will receive any distributions at a particular level.  56




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All distributions declared in cash payable to stockholders that are participants in our
dividend reinvestment plan are generally automatically reinvested in shares of our common stock. As a result, stockholders that do not participate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to
receive distributions in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would
depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the distribution payable to a stockholder. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.  57




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STOCK PERFORMANCE GRAPH This graph compares the cumulative total return on our common stock with that of the Standard & Poors BDC Index,
Standard & Poors 500 Stock Index and the Russell 2000 Financial Services Index, for the period from December 31, 2013 through December 31, 2018. The graph assumes that a person invested $10,000 in each of the following: our
common stock (SUNS), the S&P BDC Index, the S&P 500 Index, and the Russell 2000 Financial Services Index. The graph measures total stockholder return, which takes into account both changes in stock price and dividends. It assumes that
dividends paid are invested in additional shares of the same class of equity securities at the frequency with which dividends are paid of such securities during the applicable fiscal year.  LOGO The graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the 1934 Act. The stock price
performance included in the above graph is not necessarily indicative of future stock price performance.  58




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Item 6.
Selected Financial Data The selected financial and other data below should be read in conjunction with our Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated financial statements and notes thereto. Financial information is presented for the fiscal years ended December 31, 2018, 2017, 2016, 2015 and 2014. Financial information has been
derived from our consolidated financial statements that were audited by KPMG LLP (KPMG), an independent registered public accounting firm.  ($ in thousands, except per share data)

Year endedDecember 31,2018


Year endedDecember 31,2017


Year endedDecember 31,2016


Year endedDecember 31,2015


Year endedDecember 31,2014Income statement data:Total investment income

$
39,809


$
32,167


$
27,196


$
25,446


$
22,104Net expenses

$
17,189


$
9,563


$
8,880


$
10,073


$
8,290Net investment income

$
22,620


$
22,604


$
18,316


$
15,373


$
13,814Net realized gain (loss)

$
(8,291
)

$
233


$
81


$
18


$
(638
)Net change in unrealized gain (loss).

$
(516
)

$
549


$
5,855


$
(14,344
)

$
(1,486
)Net increase in net assets resulting from operations

$
13,813


$
23,386


$
24,252


$
1,047


$
11,690Per share data:Net investment income (1)

$
1.41


$
1.41


$
1.42


$
1.33


$
1.20Net realized and unrealized gain (loss)(1)

$
(0.54
)

$
0.05


$
0.50


$
(1.24
)

$
(0.18
)Dividends and distributions declared

$
1.41


$
1.41


$
1.41


$
1.41


$
1.41As ofDecember 31,2018


As ofDecember 31,2017


As ofDecember 31,2016


As ofDecember 31,2015


As ofDecember 31,2014Balance sheet data:Total investment portfolio

$
450,111


$
408,081


$
365,534


$
306,518


$
340,466Cash and cash equivalents

$
4,875


$
108,600


$
151,828


$
53,067


$
42,471Total assets

$
459,295


$
521,941


$
521,989


$
362,577


$
384,797Debt

$
170,571


$
124,200


$
98,300


$
116,200


$
143,200Net assets

$
261,392


$
270,131


$
269,145


$
188,304


$
203,519Per share data:Net asset value per share

$
16.30


$
16.84


$
16.80


$
16.33


$
17.65Other data (unaudited):Total return (2)


(7.3
)%


17.1
%


20.7
%


8.9
%


(10.5
%)Number of portfolio companies at period end


47



45



51



45



43  (1)
The per-share calculations are based on weighted average shares of
16,040,060, 16,031,303, 12,869,937, 11,533,315 and 11,532,985 for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively. (2)
Total return is based on the change in market price per share during the year and takes into account dividends,
if any, reinvested in accordance with the dividend reinvestment plan. Total return does not include a sales load.  Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations The information contained in this section should be read in conjunction with the Selected Financial and Other
Data and our Consolidated Financial Statements and notes thereto appearing elsewhere in this report. Some of the statements in this
report constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein involve risks and uncertainties, including statements as to:  

our future operating results;  

our business prospects and the prospects of our portfolio companies;  59




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

the impact of investments that we expect to make;  

our contractual arrangements and relationships with third parties;  

the dependence of our future success on the general economy and its impact on the industries in which we invest;  

the ability of our portfolio companies to achieve their objectives;  

our expected financings and investments;  

the adequacy of our cash resources and working capital; and  

the timing of cash flows, if any, from the operations of our portfolio companies. We generally use words such as anticipates, believes, expects, intends and similar expressions
to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in Risk Factors and elsewhere in this report. We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume
no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any
additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Overview Solar Senior Capital Ltd. (Solar Senior, the Company, we or our), a Maryland corporation formed
in December 2010, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company
(BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). Furthermore, as the Company is an investment company, it continues to apply the guidance in the Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 946. In addition, for tax purposes, the Company has elected to be treated, and intend to qualify annually, as a regulated investment company (RIC) under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). On February 24, 2011, we priced our initial
public offering, selling 9.0 million shares, including the underwriters over-allotment, raising approximately $168 million in net proceeds. Concurrent with this offering, Solar Senior Capital Investors LLC, an entity controlled by
Michael S. Gross, our Chairman and Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, purchased an additional 500,000 shares through a concurrent private placement, raising another $10 million. We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and the
investment opportunities are most attractive. We define middle market to refer to companies with annual revenues between $50 million and $1 billion. Our investment objective is to seek to maximize current income consistent with
the preservation of capital. We seek to achieve our investment objective by directly and indirectly investing in senior loans, including first lien, stretch-senior, and second lien debt instruments, made to private middle-market companies whose debt
is rated below investment grade, which we refer to collectively as senior loans. We may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of
our net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans. Senior loans typically pay interest at rates which are determined periodically on the basis of a floating base lending rate, primarily
LIBOR, plus a premium. Senior loans in which we invest are typically made to U.S. and, to a limited extent, non-U.S.  60




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corporations, partnerships and other business entities which operate in various industries and geographical regions. Senior loans typically are rated below investment grade. Securities rated
below investment grade are often referred to as leveraged loans, high yield or junk securities, and may be considered high risk compared to debt instruments that are rated investment grade. In
addition, some of our debt investments are not scheduled to fully amortize over their stated terms, which could cause us to suffer losses if the respective issuer of such debt investment is unable to refinance or repay their remaining indebtedness
at maturity. While the Company does not typically seek to invest in traditional equity securities as part of its investment objective, the Company may occasionally acquire some equity securities in connection with senior loan investments and in
certain other unique circumstances, such as the Companys equity investments in Gemino Healthcare Finance, LLC (Gemino) and North Mill Capital LLC (NMC). We invest in senior loans made primarily to private, leveraged middle-market companies with approximately $20 million to
$100 million of earnings before income taxes, depreciation and amortization (EBITDA). Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our
direct investments in individual securities will generally range between $5 million and $30 million each, although we expect that this investment size will vary proportionately with the size of our capital base and/or strategic
initiatives. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These opportunistic
investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States. We may invest up to 30% of our total
assets in such opportunistic investments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as a BDC under the 1940 Act. Our investment activities are managed by
Solar Capital Partners, LLC (Solar Capital Partners or Investment Adviser) and supervised by our board of directors, a majority of whom are non-interested, as such term is defined in
the 1940 Act. Solar Capital Management, LLC (Solar Capital Management or Administrator) provides the administrative services necessary for us to operate. As of December 31, 2018, the Investment Adviser has directly invested approximately $8 billion in more than 360 different portfolio
companies since 2006. Over the same period, the Investment Adviser completed transactions with approximately 200 different financial sponsors. Recent
Developments On January 8, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on
February 1, 2019 to holders of record as of January 24, 2019. On February 6, 2019, our board of directors declared a
monthly dividend of $0.1175 per share payable on March 1, 2019 to holders of record as of February 21, 2019. On
February 21, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on April 3, 2019 to holders of record as of March 21, 2019. Investments Our level of investment
activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the
general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than qualifying assets specified in the 1940 Act unless, at the time the acquisition is
made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in eligible portfolio companies. The definition of eligible portfolio company includes
certain public companies that do not have any securities listed on a national securities exchange and companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million.  61




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Revenue We generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investment
securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rate usually determined on the basis of a benchmark London interbank offered rate (LIBOR),
commercial paper rate, or the prime rate. Interest on our debt investments is generally payable monthly or quarterly but may be bi-monthly or semi-annually. In addition, our investments may provide payment-in-kind (PIK) interest. Such amounts of accrued PIK interest are added to the cost of the investment on the respective capitalization dates and generally
become due at maturity of the investment or upon the investment being called by the issuer. We may also generate revenue in the form of commitment, origination, structuring fees, fees for providing managerial assistance and, if applicable,
consulting fees, etc. Expenses All
investment professionals of the Investment Adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable
to such services, are provided and paid for by Solar Capital Partners. We bear all other costs and expenses of our operations and transactions, including (without limitation):  

the cost of our organization and public offerings;  

the cost of calculating our net asset value, including the cost of any third-party valuation services;  

the cost of effecting sales and repurchases of our shares and other securities;  

interest payable on debt, if any, to finance our investments;  

fees payable to third parties relating to, or associated with, making investments, including fees and expenses
associated with performing due diligence reviews of prospective investments and advisory fees;  

transfer agent and custodial fees;  

fees and expenses associated with marketing efforts;  

federal and state registration fees, any stock exchange listing fees;  

federal, state and local taxes;  

independent directors fees and expenses;  

brokerage commissions;  

fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;  

direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;  

fees and expenses associated with independent audits and outside legal costs;  

costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and
state securities laws; and  

all other expenses incurred by either Solar Capital Management or us in connection with administering our
business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement,
including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and their respective
staffs.  62




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We expect our general and administrative operating expenses related to our ongoing
operations to increase moderately in dollar terms. During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines.
Incentive fees, interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities
relative to comparative periods, among other factors. Portfolio and Investment Activity During our fiscal year ended December 31, 2018, we invested $186 million across 34 portfolio companies through a combination of
primary and secondary market purchases. This compares to investing $195 million in 24 portfolio companies for the previous fiscal year ended December 31, 2017. Investments sold or prepaid during the fiscal year ended December 31, 2018
totaled $193 million versus $156 million for the fiscal year ended December 31, 2017. At December 31, 2018, our
portfolio consisted of 47 portfolio companies and was invested 77.8% directly in senior secured loans and 22.2% in common equity/equity interests/warrants (of which 7.2% is Gemino and 14.9% is NMC, through which the Company indirectly investments in
senior secured loans), in each case, measured at fair value versus 45 portfolio companies invested 70.1% directly in senior secured loans and 29.9% in common equity (of which 8.6% is Gemino, 8.8% is FLLP and 12.5% is NMC) at December 31, 2017. At December 31, 2018, 93.0% or $418.2 million of our income producing investment portfolio* was floating rate and 7.0% or
$31.7 million was fixed rate, measured at fair value. At December 31, 2017, 94.5% or $385.7 million of our income producing investment portfolio* was floating rate and 5.5% or $22.3 million was fixed rate, measured at fair value. Since the initial public offering of Solar Senior on February 24, 2011 and through December 31, 2018, invested capital totaled
over $1.4 billion in over 130 portfolio companies. Over the same period, Solar Senior completed transactions with more than 75 different financial sponsors.  *
We have included Gemino Healthcare Finance, LLC and North Mill Capital LLC within our income producing
investment portfolio. Gemino Healthcare Finance, LLC We acquired Gemino (d/b/a Gemino Senior Secured Healthcare Finance) on September 30, 2013. Gemino is a commercial finance company that
originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial investment in Gemino was $32.8 million. The
management team of Gemino co-invested in the transaction and continues to lead Gemino. As of December 31, 2018, Geminos management team and Solar Senior own approximately 7% and 93% of the equity in
Gemino, respectively. Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse, $100.0 million credit facility with non-affiliates, which was expandable to $150.0 million under its accordion feature. Effective March 31, 2014,
the credit facility was expanded to $105.0 million and again on June 27, 2014 to $110.0 million. On May 27, 2016, Gemino entered into a new $125.0 million credit facility which replaced the previously existing facility. The
new facility has similar terms as compared to the previous facility and includes an accordion feature increase to $200.0 million and has a maturity date of May 27, 2020. Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of
December 31, 2018, the portfolio totaled approximately $174.1 million of commitments, of which $108.6 million were funded, on total assets of $108.6 million. As of December 31, 2017, the portfolio  63




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totaled approximately $176.3 million of commitments, of which $106.6 million were funded, on total assets of $110.6 million. At December 31, 2018, the portfolio consisted
of 34 issuers with an average balance of approximately $3.2 million versus 29 issuers with an average balance of approximately $3.7 million at December 31, 2017. All of the commitments in Geminos portfolio are floating-rate,
senior-secured, cash-pay loans. Geminos credit facility, which is non-recourse to us, had approximately $75.0 million and $75.0 million of borrowings
outstanding at December 31, 2018 and December 31, 2017, respectively. For the years ended December 31, 2018, 2017 and 2016, Gemino had net income of $3.6 million, $3.6 million and $4.6 million, respectively, on gross
income of $11.5 million, $11.4 million and $13.3 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for
distributions. As such, and subject to fluctuations in Geminos funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that Gemino will be able to maintain consistent dividend payments to
us. Geminos consolidated financial statements for the fiscal years ended December 31, 2018 and December 31, 2017 are attached as an exhibit to this annual report on Form 10-K. First Lien Loan Program LLC On
September 10, 2014, the Company entered into a limited liability company agreement to create FLLP with Voya Investment Management LLC (Voya). Voya acts as the investment advisor for several wholly-owned insurance subsidiaries of
Voya Financial, Inc. (NYSE: VOYA). The joint venture vehicle, structured as an unconsolidated Delaware limited liability company, invested primarily in senior secured floating rate term loans to middle market companies predominantly owned by private
equity sponsors or entrepreneurs. The Company and Voya committed to provide $50.75 million and $7.25 million, respectively, of capital to the joint venture. All portfolio decisions and generally all other decisions in respect of the FLLP
had to be approved by an investment committee of the FLLP consisting of representatives of the Company and Voya (with approval from a representative of each required). On February 13, 2015, FLLP commenced operations. On February 13, 2015,
FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly-owned subsidiary of FLLP, as borrower entered into a $75.0 million senior secured revolving credit facility (the FLLP Facility)
with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior acts as servicer under the FLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a
rate of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to
comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of
this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to $100.0 million and extending the maturity date to August 16, 2021. On December 19, 2018, the FLLP Facility was amended, reducing commitments
to $75.0 million. On September 18, 2018, the Company acquired Voyas share of the equity in FLLP to hold 100% of the equity in FLLP. As such, the Company consolidated FLLP as of this date. For financial reporting purposes, assets
consolidated were recorded at fair value and the cost basis of the assets consolidated were carried forward to align with the ongoing reporting of the Companys realized and unrealized gains and losses. Also due to the consolidation, the then
$3.2 million in unrealized depreciation on the Companys equity investment in FLLP was reflected as unrealized depreciation in our consolidated assets and liabilities as well as an adjustment to net increase in net assets resulting from
operations on the Companys consolidated statement of cash flows. The effect of consolidation did not affect the Companys net assets at September 30, 2018. On December 19, 2018, FLLP and the Company merged, with the Company the
surviving entity. FLLP 2015-1 LLC is now a wholly-owned subsidiary of the Company and borrowings under the FLLP Facility are consolidated. North Mill Capital LLC We acquired 100%
of the equity interests of North Mill Capital LLC (NMC) on October 20, 2017. NMC is a leading asset-backed lending commercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized businesses primarily in the manufacturing, services and distribution industries. We invested approximately
$51 million to effect the transaction. Subsequently, the  64




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Company contributed 1% of its equity interest in NMC to ESP SSC Corporation. Immediately thereafter, the Company and ESP SSC Corporation contributed their equity interests to North Mill. On
May 1, 2018, North Mill merged with and into NMC, with NMC being the surviving company. The Company and ESP SSC Corporation own 99% and 1% of the equity interests of NMC, respectively. The management team of NMC continues to lead NMC. NMC currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of December 31,
2018, the portfolio totaled approximately $247.3 million of commitments, of which $122.3 million were funded, on total assets of $155.6 million. As of December 31, 2017, the portfolio totaled
approximately $283.5 million of commitments, of which $151.6 million were funded, on total assets of $176.4 million. At December 31, 2018, the portfolio consisted of 80 issuers with an average balance of approximately
$1.5 million versus 92 issuers with an average balance of approximately $1.6 million at December 31, 2017. NMC has a senior credit facility with a bank lending group for $160.0 million which expires on October 20, 2020.
Borrowings are secured by substantially all of NMCs assets. NMCs credit facility, which is non-recourse to us, had approximately $88.9 million and $116.6 million of borrowings outstanding
at December 31, 2018 and December 31, 2017, respectively. For the year ended December 31, 2018 and the period October 20, 2017 through December 31, 2017, NMC had net income (loss) of ($2.8) million and $0.4 million,
respectively on gross income of $21.8 million and $3.1 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for
distributions. As such, and subject to fluctuations in NMCs funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NMC will be able to maintain consistent dividend payments to us.
NMCs consolidated financial statements for the fiscal years ended December 31, 2018 and 2017 are attached as an exhibit to this annual report on Form 10-K. Solar Life Science Program LLC On
February 22, 2017, the Company and Solar Capital Ltd. formed LSJV with an affiliate of Deerfield Management. The Company committed $75.0 million to LSJV. On August 16, 2018, the LSJV was dissolved, without commencing operations. Critical Accounting Policies The
preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting
policies. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts being
reported. Valuation of Portfolio Investments We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940
Act. Our valuation procedures are set forth in more detail below: The Company conducts the valuation of its assets in accordance with
GAAP and the 1940 Act. The Company generally values its assets on a quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closing price on the date of
valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to
GAAP to determine the fair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at  65




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cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of the Investment Adviser, does not represent fair
value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of the Companys board of directors (the Board). Investments for which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation or
methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, each shall be valued as follows: (i) each portfolio company or investment is initially valued by the
investment professionals responsible for the portfolio investment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser; (iii) independent valuation firms engaged by, or on behalf of, the Board will
conduct independent appraisals and review the Investment Advisers preliminary valuations and make their own independent assessment for (a) each portfolio investment that, when taken together with all other investments in the same
portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each portfolio investment that is presently in payment default and the Investment Adviser
does not expect to reach an agreement with the portfolio company in the subsequent quarter; (iv) the Board will discuss the valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the
Investment Adviser and, where appropriate, the respective independent valuation firm. The recommendation of fair value generally
considers the following factors among others, as relevant: applicable market yields; the nature and realizable value of any collateral; the portfolio companys ability to make payments; the portfolio companys earnings and discounted cash
flow; the markets in which the issuer does business; and comparisons to publicly traded securities, among others. When an external event
such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of
investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the
differences could be material. Investments are valued utilizing a market approach, an income approach, or both approaches, as
appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair
value. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future
amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors
that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security
covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio companys ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business,
comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the
valuation process. For the fiscal year ended December 31, 2018, there has been no change to the Companys valuation approaches or techniques and the nature of the related inputs considered in the valuation process. Accounting Standards Codification (ASC) Topic 820 classifies the inputs used to measure these fair values into the following
hierarchy: Level1: Quoted prices in active markets for identical assets or liabilities, accessible by the
Company at the measurement date.  66




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Level2: Quoted prices for similar assets or liabilities in active
markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices. Level3: Unobservable inputs for the asset or liability. In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The
exercise of judgment is based in part on our knowledge of the asset class and our prior experience. Determination of fair value involves
subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial
statements. Valuation of FLLP Facility The Company has made an irrevocable election to apply the fair value option of accounting to the FLLP Facility, in accordance with ASC 825-10. We believed accounting for this facility at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility. Revenue Recognition The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis.
Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or
more and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or
dividends are paid in cash, and in managements judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on investments may be recognized as income or
applied to principal depending upon managements judgment. Some of our investments may have contractual PIK interest or dividends. PIK interest and dividends computed at the contractual rate are accrued into income and reflected as receivable
up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity
dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally
becomes due at the maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIK investment will be placed on
non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends is reversed from the related receivable
through interest or dividend income, respectively. The Company does not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK
investments on non-accrual status are restored to accrual status if the Company again believes that PIK is expected to be realized. Loan origination fees, original issue discount, and market discounts are
capitalized and amortized into income using the interest method or straight-line, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other
investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned. The
typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit risk associated with such instruments and that such investments may represent a significantly higher credit
risk than coupon loans. PIK securities may have unreliable valuations  67




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because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIK interest has the effect of
generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK interest also increases the loan-to-value
ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser based on non-cash accruals that ultimately may not be realized, but the Investment Adviser
will be under no obligation to reimburse the Company for these fees. For the fiscal years ended December 31, 2018, 2017 and 2016, capitalized PIK income totaled $1.4 million, $0.5 million and $0.0 million, respectively. Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss We generally measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis
of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized origination or commitment fees and prepayment penalties. The net change in unrealized gain or loss reflects the change in
portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gain or loss, when gains or losses are realized. Gains or losses on investments are calculated by using the specific identification
method. Income Taxes Solar Senior
Capital, a U.S. corporation, has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. In order to qualify for taxation as a RIC, the Company is required, among other things, to timely distribute to its
stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. Depending on the level of taxable income earned in a given tax year, we may choose to carry forward taxable income in excess of current year
distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the
Company accrues an estimated excise tax, if any, on estimated excess taxable income. Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework
 Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts
Statement, including the consideration of costs and benefits. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.
Early adoption is permitted. The Company is evaluating the impact of ASU 2018-13 on its consolidated financial statements and disclosures. In August 2018, the US Securities and Exchange Commission adopted final rules to eliminate redundant, duplicative, overlapping, outdated or
superseded disclosure requirements in light of other disclosure requirements, GAAP or changes in the information environment. These rules amend certain provisions of Regulation S-X and Regulation S-K, certain rules promulgated under the Securities Act of 1933 and the Securities Exchange Act of 1934 and certain related forms. These changes became effective on November 5, 2018. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which amends FASB ASC 230. The
amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts
generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update apply to all entities that have  68




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restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. For public business entities, the amendments were effective for fiscal years
beginning after December 15, 2017, and interim periods within those fiscal years. The Company has adopted ASU 2016-18 and determined that the adoption has not had a material impact on its consolidated
financial statements and disclosures. In March 2017, the FASB issued ASU 2017-08, Premium
Amortization on Purchased Callable Debt Securities, which will amend FASB ASC 310-20. The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium,
generally requiring the premium to be amortized to the earliest call date. For public business entities, the amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early
adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of ASU 2017-08 on its consolidated financial statements and disclosures. In May 2014, the FASB issued ASC 606, Revenue From Contracts With Customers, originally effective for public business entities with annual
reporting periods beginning after December 15, 2016. On August 12, 2015, the FASB issued an ASU, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASC 606 for one year.
ASC 606 provides accounting guidance related to revenue from contracts with customers. For public business entities, ASC 606 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The
Company has adopted ASC 606 and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures. RESULTS OF OPERATIONS Results
comparisons are for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016. Investment Income For the fiscal years ended December 31, 2018, 2017 and 2016, gross investment income totaled $39.8 million, $32.2 million and
$27.2 million, respectively. The increase in gross investment income from fiscal year 2017 to fiscal year 2018 was primarily due to average portfolio growth, including from our investment in NMC. The increase in gross investment income from
fiscal year 2016 to fiscal year 2017 was primarily due to the growth of the income producing portfolio, as well as the increase in LIBOR year over year. Expenses Net expenses totaled
$17.2 million, $9.6 million and $8.9 million, respectively, for the fiscal years ended December 31, 2018, 2017 and 2016, of which $7.5 million, $4.9 million and $4.9 million, respectively, were gross base
management fees and gross performance-based incentive fees, and $7.8 million, $3.8 million and $3.3 million, respectively, were interest and other credit facility expenses. Over the same periods, $0.0 million, $2.0 million
and $0.8 million of base management fees were waived and $1.1 million, $0.7 million and $1.2 million of performance-based incentive fees were waived. Administrative services and other general and administrative expenses totaled
$3.0 million, $3.4 million and $2.7 million, respectively, for the fiscal years ended December 31, 2018, 2017 and 2016. Expenses generally consist of management fees, performance-based incentive fees, administrative services
expenses, insurance, legal expenses, directors expenses, audit and tax expenses, transfer agent fees and expenses, and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused
fees, agency fees and loan origination fees, if any, among others. The increase in net expenses for the year ended December 31, 2018 was primarily due to higher interest expense, including from the increase in LIBOR, as well as higher incentive
and management fee expense on a larger portfolio as compared to the year ago period. The increase in net expenses for the year ended December 31, 2017 was primarily due to higher interest expense stemming from the increase in LIBOR year over
year.  69




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Net Investment Income The Companys net investment income totaled $22.6 million or $1.41 per average share, $22.6 million or $1.41 per average share
and $18.3 million or $1.42 per average share, for the fiscal years ended December 31, 2018, 2017 and 2016, respectively. Net Realized Gain
(Loss) The Company had investment sales and prepayments totaling approximately $193 million, $156 million and
$112 million, respectively, for the fiscal years ended December 31, 2018, 2017 and 2016. Net realized gain (loss) for the fiscal years ended December 31, 2018, 2017 and 2016 totaled ($8.3) million, $0.2 million and
$0.1 million, respectively. Net realized losses for the fiscal year ended December 31, 2018 were primarily related to the Companys exit from its direct and indirect investments in Metamorph US 3, LLC. Net realized gain for the fiscal
year ended December 31, 2017 was primarily related to select sales of a few portfolio investments. Modest net realized gains for the fiscal year ended December 31, 2016 were also primarily related to select sales of a few portfolio
investments. Net Change in Unrealized Gain (Loss) For the fiscal years ended December 31, 2018, 2017 and 2016, the net change in unrealized gain (loss) on the Companys assets and
liabilities totaled ($0.5) million, $0.5 million and $5.9 million, respectively. Net unrealized loss for the fiscal year ended December 31, 2018 was primarily due to depreciation in the value of our investments in Trident USA Health
Services, Gemino Healthcare Finance, LLC and PPT Management Holdings, LLC, among others, partially offset by the reversal of previously recorded unrealized loss on our direct and indirect investments in Metamorph US 3, LLC and Hostway Corporation.
Net unrealized gain for the fiscal year ended December 31, 2017 was primarily due to appreciation in the value of our investments in Advantage Sales and Marketing, Inc., FLLP and Trident USA Health Services, among others. Partially offsetting
the unrealized gains was depreciation in our investments in PPT Management Holdings, LLC, Meter Readings Holding, LLC and Polycom, Inc., among others. Net unrealized gain for the fiscal year ended December 31, 2016 was primarily due to
appreciation in the value of our investments in Securus Technologies, Inc., Gemino and Global Tel*Link Corporation, among others. Partially offsetting the unrealized gains was depreciation in our investments in TwentyEighty, Inc., Metamorph US 3,
LLC and Engineering Solutions & Products, LLC, among others. Net Increase in Net Assets From Operations For the fiscal years ended December 31, 2018, 2017 and 2016, the Company had a net increase in net assets resulting from operations of
$13.8 million, $23.4 million and $24.3 million, respectively. For the fiscal years ended December 31, 2018, 2017 and 2016, earnings per average share were $0.86, $1.46 and $1.88, respectively. LIQUIDITY AND CAPITAL RESOURCES The
Companys liquidity and capital resources are generally available through its revolving credit facilities, through periodic follow-on equity offerings, as well as from cash flows from operations,
investment sales and pre-payments of investments. At December 31, 2018, the Company had $170.6 million in borrowings outstanding on its credit facilities and $129.4 million of unused capacity,
subject to borrowing base limits. In September 2016, the Company closed a follow-on public equity
offering of 4.5 million shares of common stock at $16.76 per share raising approximately $75.0 million in net proceeds. In the future, the Company may raise additional equity or debt capital, among other considerations. The primary uses of
funds will be investments in portfolio companies, reductions in debt outstanding and other general corporate purposes. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can
be no assurance that any such issuance will occur or be successful.  70




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We currently expect that our liquidity needs will be met with cash flows from operations,
borrowings under our $225 million senior secured revolving credit facility (the Credit Facility), including its accordion feature, the FLLP Facility as well as from other available financing activities. Cash Equivalents We deem certain U.S.
Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Company makes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of
Section 55(a) of the 1940 Act. From time to time, including at or near the end of each fiscal quarter, we consider using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash
equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from
time-to-time we may purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position
on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. The amount of these transactions or such drawn cash
for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. We held no cash equivalents as of December 31, 2018. Debt Credit FacilityOn
August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the SUNS SPV) which entered into the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017,
commitments to the Credit Facility, as amended, were increased from $175 million to $200 million by utilizing the accordion feature. The commitments can also be expanded up to $600 million. The stated interest rate on the Credit
Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current maturity date is June 1, 2023. The Credit Facility is secured by all of the assets held by SUNS SPV. Under the terms of the Credit Facility, Solar Senior Capital and
SUNS SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit
facilities. The Credit Facility also includes usual and customary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014 and May 29, 2015 to extend maturities and add
greater investment flexibility, among other changes. On June 1, 2018, the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. On
July 13, 2018, commitments to the Credit Facility, as amended, were increased from $200 million to $225 million by utilizing the accordion feature. At December 31, 2018, the Company was in compliance with all financial and
operational covenants required by the Credit Facility. FLLP FacilityOn February 13, 2015, FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly-owned subsidiary of FLLP, as borrower entered into a $75.0 million FLLP Facility with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior acts as
servicer under the FLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.25%-2.50%. FLLP
and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and
other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to
$100.0 million and extending the maturity date to August 16, 2021. On December 19, 2018, the FLLP Facility was amended, reducing commitments to $75.0 million. There were $51.4 million of borrowings outstanding as of
December 31, 2018.  71




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Contractual Obligations  Payments due by Period as of December 31, 2018(dollars in millions)Total


Less than1 year


1-3 years


3-5 years


More than5 yearsRevolving credit facilities (1)

$
170.6


$



$
51.4


$
119.2


$
  (1)
At December 31, 2018, we had a total of $129.4 million of unused borrowing capacity under our
revolving credit facilities, subject to borrowing base limits. Information about our senior securities is shown in the
following table (in thousands) as of each year ended December 31 since the Company commenced operations, unless otherwise noted. The  indicates information which the SEC expressly does not require to be disclosed for certain
types of senior securities.  Class and Year

Total AmountOutstanding(1)


AssetCoveragePer Unit(2)


InvoluntaryLiquidatingPreferencePer Unit(3)


AverageMarket ValuePer Unit(4)Credit FacilityFiscal 2018

$
119,200


$
1,770


$




N/AFiscal 2017


124,200



3,175







N/AFiscal 2016


98,300



3,738







N/AFiscal 2015


116,200



2,621







N/AFiscal 2014


143,200



2,421







N/AFiscal 2013


61,400



4,388







N/AFiscal 2012


39,100



5,453







N/AFiscal 2011


8,600



21,051







N/AFLLP FacilityFiscal 2018


51,371



762







N/ATotal Senior SecuritiesFiscal 2018

$
170,571


$
2,532


$




N/AFiscal 2017


124,200



3,175







N/AFiscal 2016


98,300



3,738







N/AFiscal 2015


116,200



2,621







N/AFiscal 2014


143,200



2,421







N/AFiscal 2013


61,400



4,388







N/AFiscal 2012


39,100



5,453







N/AFiscal 2011


8,600



21,051







N/A  (1)
Total amount of each class of senior securities outstanding at the end of the period presented. (2)
The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our
consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage
Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit was divided based on the amount outstanding at the end of the period for each. As of December 31, 2018, asset
coverage was 253.2%. (3)
The amount to which such class of senior security would be entitled upon the involuntary liquidation of the
issuer in preference to any security junior to it. (4)
Not applicable, we do not have senior securities that are registered for public trading. We have also entered into two contracts under which we have future commitments: the Advisory Agreement, pursuant to which Solar Capital
Partners has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which Solar Capital Management has agreed to furnish us with the  72




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facilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf
managerial assistance to those portfolio companies to which we are required to provide such assistance. Payments under the Advisory Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of the Administrators overhead in performing its obligations under the
Administration Agreement, including rent, technology systems, insurance and our allocable portion of the costs of our chief financial officer and chief compliance officer and their respective staffs. Either party may terminate each of the
Advisory Agreement and Administration Agreement without penalty upon 60 days written notice to the other. See note 3 to our Consolidated Financial Statements. Off-Balance Sheet Arrangements From time-to-time and in the normal course of business, the
Company may make unfunded capital commitments to current or prospective portfolio companies. Typically, the Company may agree to provide delayed-draw term loans or, to a lesser extent, revolving loan or equity commitments. These unfunded capital
commitments always take into account the Companys liquidity and cash available for investment, portfolio and issuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments at
December 31, 2018 and December 31, 2017, respectively:  (in millions)

December 31,2018


December 31,2017Rubius Therapeutics, Inc.**

$
4.1


$
MSHC, Inc.


3.3



The Hilb Group, LLC & Gencorp Insurance Group, Inc.


3.2



0.4WIRB-Copernicus Group, Inc.


2.7



DISA Holdings Acquisition Corp


2.6



MRI Software LLC


2.5



2.4Solara Medical Supplies, Inc.


2.1



Gemino Healthcare Finance, LLC*


1.4



5.0GenMark Diagnostics, Inc.


0.7



Engineering Solutions & Products, LLC


0.5



1.7Centria Healthcare LLC.


0.3



AQA Acquisition Holding, Inc.


0.1



TwentyEighty, Inc


0.1



0.1VetCor Professional Practices LLC






6.7Alera Group Intermediate Holdings, Inc






4.7VT Buyer Acquisition Corp. (Veritext)






3.5MHE Intermediate Holdings, LLC






1.0PetVet Care Centers, LLC






1.6Ministry Brands, LLC






0.4Total Commitments

$
23.6


$
27.5  *
The Company controls the funding of the Gemino commitment and may cancel it at its discretion. **
Commitments are subject to the portfolio company achieving certain milestones. As of December 31, 2018,
these milestones have not yet been achieved, and as such the portfolio company would not have been able to draw on any of the stated commitment at that time. As of December 31, 2018 and December 31, 2017, the Company had sufficient cash available and/or liquid securities available to fund
its commitments. In the normal course of its business, we invest or trade in various financial instruments and may enter into various
investment activities with off-balance sheet risk, which may include forward foreign currency contracts.  73




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Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying
degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities. Distributions The
following table reflects the cash distributions per share on our common stock for the two most recent fiscal years and the current fiscal year to date:  Date Declared

Record Date


Payment Date


AmountFiscal 2019February 21, 2019


March 21, 2019



April 3, 2019


$
0.1175February 6, 2019


February 21, 2019



March 1, 2019



0.1175January 8, 2019


January 24, 2019



February 1, 2019



0.1175YTD Total (2019)









$
0.3525Fiscal 2018December 6, 2018


December 20, 2018



January 4, 2019


$
0.1175November 5, 2018


November 21, 2018



December 4, 2018



0.1175October 4, 2018


October 24, 2018



November 1, 2018



0.1175September 6, 2018


September 25, 2018



October 2, 2018



0.1175August 2, 2018


August 23, 2018



August 31, 2018



0.1175July 3, 2018


July 19, 2018



July 31, 2018



0.1175June 6, 2018


June 21, 2018



July 3, 2018



0.1175May 7, 2018


May 23, 2018



June 1, 2018



0.1175April 3, 2018


April 19, 2018



May 2, 2018



0.1175February 22, 2018


March 22, 2018



April 3, 2018



0.1175February 7, 2018


February 22, 2018



March 1, 2018



0.1175January 5, 2018


January 18, 2018



January 31, 2018



0.1175Fiscal YTD Total (2018)









$
1.41Fiscal 2017December 7, 2017


December 21, 2017



January 4, 2018


$
0.1175November 2, 2017


November 22, 2017



December 1, 2017



0.1175October 5, 2017


October 19, 2017



November 1, 2017



0.1175September 14, 2017


September 22, 2017



October 3, 2017



0.1175August 1, 2017


August 17, 2017



August 31, 2017



0.1175July 6, 2017


July 20, 2017



August 1, 2017



0.1175June 7, 2017


June 22, 2017



July 6, 2017



0.1175May 2, 2017


May 18, 2017



June 2, 2017



0.1175April 6, 2017


April 20, 2017



May 2, 2017



0.1175February 22, 2017


March 23, 2017



April 4, 2017



0.1175February 7, 2017


February 23, 2017



March 1, 2017



0.1175January 5, 2017


January 19, 2017



February 1, 2017



0.1175Total (2017)









$
1.41 Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the
calendar year. Future distributions, if any, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable return of capital, if any, as applicable.  74




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We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC
status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we
currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future
decide to retain such capital gains for investment. We maintain an opt out dividend reinvestment plan for our common
stockholders. As a result, if we declare a distribution, then stockholders cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically opt out of the dividend reinvestment
plan so as to receive cash distributions. We may not be able to achieve operating results that will allow us to make distributions at a
specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions.
Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including
possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or
market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a
regulated investment company. With respect to the distributions to stockholders, income from origination, structuring, closing and
certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders. For the years ended December 31, 2018 and December 31, 2017, 4.9% and 11.8% of
distributions were funded from the waiver of management and incentive fees. Related Parties We have entered into a number of business relationships with affiliated or related parties, including the following:  

We have entered into the Advisory Agreement with Solar Capital Partners. Mr. Gross, our Chairman and Chief
Executive Officer and Mr. Spohler, our Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial and controlling interests in, the Investment Adviser. In addition, Mr. Peteka,
our Chief Financial Officer, Treasurer and Corporate Secretary serves as the Chief Financial Officer for Solar Capital Partners.  

The Administrator provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in
performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and their
respective staffs.  

We have entered into a license agreement with the Investment Adviser, pursuant to which the Investment Adviser
has granted us a non-exclusive, royalty-free license to use the name Solar Capital. The Investment Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part,
with ours. For example, the Investment Adviser presently serves as investment  75




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##### Table of Contents

adviser to Solar Capital Ltd., a publicly traded BDC, which focuses on investing in senior secured loans, including stretch-senior and unitranche loans and to a lesser extent mezzanine loans and
equity securities. In addition, Michael S. Gross, our Chairman and Chief Executive Officer, Bruce Spohler, our Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for Solar Capital Ltd. The
Investment Adviser and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate
factors, the Investment Adviser or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only
to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Advisers allocation procedures. Related party transactions may occur among Solar Senior Capital Ltd., Gemino and NMC. These transactions may occur in the normal course of
business. No administrative fees are paid to Solar Capital Partners by Gemino or NMC. In addition, we have adopted a formal code of
ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.  Item 7A.
Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including changes in interest rates. During the fiscal year ended December 31, 2018, certain of
the investments in our comprehensive investment portfolio had floating interest rates. These floating rate investments were primarily based on floating LIBOR and typically have durations of one to three months after which they reset to current
market interest rates. Additionally, some of these investments have LIBOR floors. The Company also has revolving credit facilities that are generally based on floating LIBOR. Assuming no changes to our balance sheet as of December 31, 2018 and
no new defaults by portfolio companies, a hypothetical one-quarter of one percent decrease in LIBOR on our comprehensive floating rate assets and liabilities would reduce our net investment income by three
cents per average share over the next twelve months. Assuming no changes to our balance sheet as of December 31, 2018 and no new defaults by portfolio companies, a hypothetical one percent increase in LIBOR on our comprehensive floating rate
assets and liabilities would increase our net investment income by approximately eleven cents per average share over the next twelve months. However, we may hedge against interest rate fluctuations from time-to-time by using standard hedging instruments such as futures, options, swaps and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse
changes in interest rates, they may also limit our ability to participate in any benefits of certain changes in interest rates with respect to our portfolio of investments. At December 31, 2018, we have no interest rate hedging instruments
outstanding on our balance sheet.  Increase (Decrease) in LIBOR






(0.25
%)


1.00
%Increase (Decrease) in Net Investment Income Per Share Per Year





$
(0.03
)

$
0.11  76




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##### Table of Contents

Item 8.
Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  Managements Report on Internal Control over Financial
Reporting


78Report of Independent Registered Public Accounting Firm


79Consolidated Statements of Assets 
& Liabilities as of December 31, 2018 and December 31, 2017


81Consolidated Statements of Operations for the years ended December 
31, 2018, 2017 and 2016


82Consolidated Statements of Changes in Net Assets for the years ended December 31,
 2018, 2017 and 2016


83Consolidated Statements of Cash Flows for the years ended December 
31, 2018, 2017 and 2016


84Consolidated Schedule of Investments as of December 
31, 2018 and December 31, 2017


85Notes to Consolidated Financial Statements


91  77




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##### Table of Contents

MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for
performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2018. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Companys internal control over financial reporting includes those policies and procedures
that (i) pertain to assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the consolidated financial statements. Management performed an assessment of the effectiveness of the Companys internal control over financial reporting as of
December 31, 2018 based upon criteria in Internal Control  Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, management
determined that the Companys internal control over financial reporting was effective as of December 31, 2018 based on the criteria on Internal Control  Integrated Framework (2013) issued by COSO. The effectiveness of the Companys internal control over financial reporting as of December 31, 2018 has been audited by KPMG LLP,
an independent registered public accounting firm, as stated in their report which appears herein.  78




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##### Table of Contents

Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Solar Senior Capital
Ltd.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedule of investments, of Solar Senior Capital
Ltd. (and consolidated subsidiaries) (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three-year period ended December 31,
2018, and the related notes (collectively, the consolidated financial statements). We also have audited the Companys internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control
 Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the
consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2018, based on criteria established in Internal Control  Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Companys management is
responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
managements report on internal control over financial reporting. Our responsibility is to express an opinion on the Companys consolidated financial statements and an opinion on the Companys internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included
performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 and 2017, by correspondence with the custodian, portfolio companies or
agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.  79




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##### Table of Contents

Definition and Limitations of Internal Control Over Financial Reporting A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP We have served as the auditor of one or more
Solar Capital Partners, LLC (the Investment Advisor) investment companies since 2007. New York, New York February 21, 2019  80




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except share amounts)  December 31,2018


December 31,2017AssetsInvestments at fair value:Companies less than 5% owned (cost: $355,354 and $289,848, respectively)

$
348,211


$
283,983Companies 5% to 25% owned (cost: $3,524 and $3,625, respectively)


2,350



2,213Companies more than 25% owned (cost: $98,439 and $121,298, respectively)


99,550



121,885Cash


4,875



3,726Cash equivalents (cost: $0 and $104,874, respectively)






104,874Interest receivable


2,141



1,732Dividends receivable


1,893



2,723Receivable for investments sold


87



508Other receivable






20Prepaid expenses and other assets


188



277Total assets

$
459,295


$
521,941LiabilitiesPayable for investments and cash equivalents purchased

$
22,805


$
122,110Credit facility ($119,200 and $124,200 face amounts, respectively, reported net of unamortized
debt issuance costs of $1,662 and $0, respectively. See notes 6 and 7)


117,538



124,200FLLP 2015-1, LLC revolving credit facility (the FLLP
Facility) (see notes 6 and 7)


51,371



Distributions payable


1,885



1,884Management fee payable (see note 3)


1,189



999Performance-based incentive fee payable (see note 3)


106



374Interest payable (see note 7)


1,260



401Administrative services expense payable (see note 3)


923



944Other liabilities and accrued expenses


826



898Total liabilities

$
197,903


$
251,810Commitments and contingencies (see notes 12, 13 and 14)Net AssetsCommon stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized,
respectively, and 16,040,485 and 16,036,730 issued and outstanding, respectively

$
160


$
160Paid-in capital in excess of par (see note 2f)


288,789



287,841Accumulated distributable net loss (see note 2f)


(27,557
)


(17,870
)Total net assets

$
261,392


$
270,131Net Asset Value Per Share

$
16.30


$
16.84 See notes to consolidated financial statements.  81




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts)  Year ended December 31,2018


2017


2016INVESTMENT INCOME:Interest:Companies less than 5% owned

$
27,145


$
22,652


$
19,728Companies 5% to 25% owned


360



201



201Dividends:Companies more than 25% owned


12,040



8,866



7,077Other income:Companies less than 5% owned


191



369



125Companies 5% to 25% owned


23







Companies more than 25% owned


50



79



65Total investment income


39,809



32,167



27,196EXPENSES:Management fees (see note 3)

$
4,603


$
3,861


$
3,385Performance-based incentive fees (see note 3)


2,922



1,083



1,560Interest and other credit facility expenses (see note 7)


7,808



3,848



3,281Administrative services expense (see note 3)


1,529



1,554



1,245Other general and administrative expenses


1,434



1,888



1,411Total expenses


18,296



12,234



10,882Management fees waived (see note 3)






(1,962
)


(797
)Performance-based incentive fees waived (see note 3)


(1,107
)


(709
)


(1,205
)Net expenses


17,189



9,563



8,880Net investment income

$
22,620


$
22,604


$
18,316REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS:Net realized gain (loss) on investments and cash equivalents:Companies less than 5% owned

$
(5,082
)

$
233


$
81Companies more than 25% owned


(3,209
)






Net realized gain (loss) on investments and cash equivalents


(8,291
)


233



81Net change in unrealized gain (loss) on investments and cash equivalents:Companies less than 5% owned


1,931



(227
)


5,233Companies 5% to 25% owned


238



473



(492
)Companies more than 25% owned


(2,685
)


303



1,114Net change in unrealized gain (loss) on investments and cash equivalents


(516
)


549



5,855Net realized and unrealized gain (loss) on investments and cash equivalents


(8,807
)


782



5,936NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$
13,813


$
23,386


$
24,252EARNINGS PER SHARE (see note 5)

$
0.86


$
1.46


$
1.88 See notes to consolidated financial statements.  82




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (in thousands, except share amounts)  Year ended December 31,2018


2017


2016Increase (decrease) in net assets resulting from operations:Net investment income

$
22,620


$
22,604


$
18,316Net realized gain (loss)


(8,291
)


233



81Net change in unrealized gain (loss)


(516
)


549



5,855Net increase in net assets resulting from operations


13,813



23,386



24,252Distributions to stockholders (see note 9a):From net investment income


(22,617
)


(22,604
)


(18,316
)Capital transactions (see note 16):Net proceeds from shares sold










75,255Less common stock offering costs










(376
)Reinvestment of distributions


65



204



26Net increase in net assets resulting from capital transactions


65



204



74,905Total increase (decrease) in net assets


(8,739
)


986



80,841Net assets at beginning of year


270,131



269,145



188,304Net assets at end of year

$
261,392


$
270,131


$
269,145Capital share activity:Common stock sold










4,490,152Common stock issued from reinvestment of distributions


3,755



11,719



1,544Net increase from capital share activity


3,755



11,719



4,491,696   See notes to consolidated financial statements.  83




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)  Year ended December 31,2018


2017


2016Cash Flows from Operating Activities:Net increase in net assets resulting from operations

$
13,813


$
23,386


$
24,252Adjustments to reconcile net increase in net assets resulting from operations to net cash provided
by (used in) operating activities:Net realized (gain) loss on investments and cash equivalents


8,291



(233
)


(81
)Net change in unrealized (gain) loss on investments and cash equivalents


516



(549
)


(5,855
)(Increase) decrease in operating assets:Purchase of investments


(238,711
)


(196,172
)


(176,924
)Proceeds from disposition of investments


188,967



154,907



123,844Capitalization of
payment-in-kind interest


(1,128
)


(500
)


Collection of
payment-in-kind interest


35







Receivable for investments sold


421



942



(1,405
)Interest receivable


(409
)


(269
)


564Dividends receivable


830



(1,301
)


(896
)Other receivable


20



(1
)


(6
)Prepaid expenses and other assets


89



(4
)


108Increase (decrease) in operating liabilities:Payable for investments and cash equivalents purchased


(99,305
)


(29,202
)


96,415Management fee payable


190



895



(727
)Performance-based incentive fees payable


(268
)


374



Administrative services expense payable


(21
)


323



87Interest payable


859



160



(21
)Other liabilities and accrued expenses


(72
)


515



189Net Cash Provided by (Used in) Operating Activities


(125,883
)


(46,729
)


59,544Cash Flows from Financing Activities:Net proceeds from shares sold










75,255Deferred financing costs


218







Consolidations of FLLP Facility


49,796







Common stock offering costs










(376
)Cash distributions paid


(22,551
)


(22,399
)


(17,762
)Proceeds from borrowings


205,070



162,000



136,800Repayments of borrowings


(210,375
)


(136,100
)


(154,700
)Net Cash Provided by (Used in) Financing Activities


22,158



3,501



39,217NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(103,725
)


(43,228
)


98,761CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR


108,600



151,828



53,067CASH AND CASH EQUIVALENTS AT END OF YEAR

$
4,875


$
108,600


$
151,828Supplemental disclosure of cash flow information:Cash paid for interest

$
6,949


$
3,688


$
3,302 Non-cash financing activities consist of the reinvestment of dividends of $65, $204
and $26 for the fiscal years ended December 31, 2018, 2017 and 2016, respectively. See notes to consolidated financial statements.  84




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS December 31, 2018 (in thousands, except share/unit amounts)  Description

Industry

SpreadaboveIndex (3)


LiborFloor


InterestRate (1)


Acquisition  Date


MaturityDate


ParAmount


Cost


FairValueBank Debt/Senior Secured Loans  134.1%1A Smart Start LLC(2)(11)(14)

Electrical Equipment, Instruments &
Components


L+450



1.00
%


7.02
%


12/21/2017



2/21/2022


$
13,936


$
13,883


$
13,902Acrisure, LLC(2)

Insurance


L+425



1.00
%


6.77
%


5/3/2017



11/22/2023



7,372



7,358



7,164Advantage Sales and Marketing, Inc.(2)(11)

Professional Services


L+325



1.00
%


5.77
%


2/14/2018



7/23/2021



4,950



4,873



4,838Advantage Sales and Marketing, Inc.(11)

Professional Services


L+650



1.00
%


9.02
%


2/14/2013



7/25/2022



8,000



7,969



7,680Aegis Toxicology Sciences Corporation(2)(11)(14)

Health Care Providers & Services


L+550



1.00
%


8.10
%


5/7/2018



5/9/2025



10,973



10,788



10,973Alera Group Intermediate Holdings, Inc.(2)(11)

Insurance


L+450







7.02
%


7/27/2018



8/1/2025



4,993



4,985



4,943Alimera Sciences, Inc.(2)(11)

Pharmaceuticals


L+765







10.03
%


1/5/2018



7/1/2022



5,000



5,009



5,025Alteon Health, LLC (fka Island Medical)(2)(11)(14)

Health Care Providers & Services


L+650



1.00
%


9.02
%


3/31/2017



9/1/2022



7,469



7,414



7,095American Teleconferencing Services, Ltd. (PGI) (2)(11)

Communications Equipment


L+650



1.00
%


9.09
%


5/5/2016



12/8/2021



14,113



13,643



13,937AQA Acquisition Holding, Inc. (2)(11)

Software


L+425



1.00
%


7.05
%


9/7/2018



5/24/2023



5,675



5,621



5,604Capstone Logistics Acquisition, Inc.(2)(11)(14)

Professional Services


L+450



1.00
%


7.02
%


10/3/2014



10/7/2021



12,358



12,302



12,204Centria Healthcare LLC (2)(11)

Health Care Providers & Services


L+400



1.00
%


6.64
%


11/19/2018



11/3/2021



4,720



4,674



4,672Confie Seguros Holding II Co.(2)(11)(14)

Insurance


L+475



1.00
%


7.46
%


10/13/2016



4/19/2022



14,173



14,082



14,014DISA Holdings Acquisition Subsidiary Corp.(2)(11)

Professional Services


L+400



1.00
%


6.35
%


6/14/2018



6/30/2022



7,731



7,696



7,712Edgewood Partners Holdings, LLC(2)(11)(14)

Insurance


L+425



1.00
%


6.77
%


3/28/2018



9/8/2024



13,272



13,255



13,272Empower Payments Acquisition, Inc. (RevSpring).(2)(11)

Professional Services


L+425



1.00
%


7.05
%


11/28/2016



10/11/2025



5,000



4,988



4,988Engineering Solutions & Products, LLC(6)(11)

Aerospace & Defense


L+600



2.00
%


8.59
%


11/5/2013



11/5/2019



2,282



2,157



2,282Falmouth Group Holdings Corp. (AMPAC) (2)(11)(14)

Chemicals


L+675



1.00
%


9.27
%


12/15/2016



12/14/2021



11,859



11,859



11,859GenMark Diagnostics, Inc(2)(4)(11)

Health Care Providers & Services










6.90
%


4/22/2016



1/1/2021



10,039



10,953



10,953Global Holdings LLC & Payment Concepts LLC(2)(11)

Consumer Finance


L+750



1.00
%


10.24
%


3/31/2017



5/5/2022



11,400



11,241



11,400Kellermeyer Bergensons Services, LLC (KBS)(2)(11)(14)

Commercial Services & Supplies


L+475



1.00
%


7.27
%


10/31/2014



10/29/2021



8,623



8,579



8,623Kore Wireless Group, Inc.(2)(11)

Wireless Telecommunication Services


L+550



1.00
%


8.29
%


12/21/2018



12/21/2024



12,046



11,805



11,926Logix Holding Company, LLC(2)(11)

Communications Equipment


L+575



1.00
%


8.27
%


8/11/2017



12/22/2024



10,688



10,593



10,688Mavenir Systems, Inc.(2)(11)

Software


L+600



1.00
%


8.39
%


5/1/2018



5/8/2025



9,950



9,765



9,920MHE Intermediate Holdings, LLC (TFS-Miner)(2)(11)(14)

Air Freight & Logistics


L+500



1.00
%


7.74
%


3/8/2017



3/10/2024



5,951



5,902



5,891Ministry Brands, LLC(2)(11)(14)

Software


L+400



1.00
%


6.52
%


11/21/2016



12/2/2022



14,320



14,223



14,320MRI Software LLC(2)(11)(14)

Software


L+550



1.00
%


7.90
%


6/7/2017



6/30/2023



9,147



9,074



9,055MSHC, Inc. (Service Logic) (2)(11)(14)

Commercial Services & Supplies


L+425



1.00
%


6.89
%


7/12/2018



7/31/2023



2,719



2,706



2,705National Spine and Pain Centers, LLC (11)(14)

Health Care Providers & Services


L+450



1.00
%


7.02
%


9/18/2018



6/2/2024



2,585



2,574



2,546On Location Events, LLC & PrimeSport Holdings Inc. (2)(11)(14)

Media


L+550



1.00
%


7.90
%


12/7/2017



9/29/2021



14,375



14,242



14,267Pet Holdings ULC & Pet Supermarket, Inc. (4)(11)(14)

Specialty Retail


L+550



1.00
%


7.90
%


9/18/2018



7/5/2022



4,593



4,548



4,570PPT Management Holdings, LLC(2)(11) 

Health Care Providers & Services


L+750 PIK



1.00
%


9.85
%


12/15/2016



12/16/2022



8,583



8,523



7,295Pre-Paid Legal Services, Inc.(2)

Diversified Consumer Services


L+300







5.52
%


4/13/2018



5/1/2025



1,453



1,446



1,425Radiology Partners, Inc.(2)(11)

Health Care Providers & Services


L+425







6.66
%


6/28/2018



7/9/2025



7,481



7,411



7,350Restoration Robotics, Inc. (2)(11)

Health Care Equipment & Supplies


L+795







10.33
%


5/10/2018



5/1/2022



2,000



1,975



1,995Rubius Therapeutics, Inc. (2)(11)

Pharmaceuticals


L+550







7.97
%


12/21/2018



12/21/2023



2,061



2,056



2,055SHO Holding I Corporation (Shoes for Crews)(2)(11)

Footwear


L+500



1.00
%


7.53
%


11/20/2015



10/27/2022



5,820



5,788



5,674Solara Medical Supplies, Inc.(2)(11)(14)

Health Care Providers & Services


L+600



1.00
%


8.52
%


5/31/2018



5/31/2023



5,933



5,853



5,933The Hilb Group, LLC & Gencorp Insurance Group, Inc.(2)(11)(14)

Insurance


L+475



1.00
%


7.55
%


3/16/2016



6/24/2021



10,982



10,876



10,982Trident USA Health Services (2)(11) 

Health Care Providers & Services


L+600
(13)


1.25
%


8.53
%


7/29/2013



7/31/2022



7,057



7,051



4,234TwentyEighty, Inc.(11)

Professional Services


L+800



1.00
%


10.80
%


1/31/2017



3/31/2020



96



95



96TwentyEighty, Inc.(11) 

Professional Services










8.00
%(7)


1/31/2017



3/31/2020



2,067



2,014



2,067TwentyEighty, Inc.(11) 

Professional Services










9.00
%(8)


1/31/2017



3/31/2020



1,981



1,934



1,952U.S. Acute Care Solutions, LLC(2)(11)(14)

Health Care Providers & Services


L+500



1.00
%


7.52
%


12/22/2016



5/15/2021



6,370



6,333



6,370US Radiology Specialists, Inc.(2)(11)

Health Care Providers & Services


L+450



1.00
%


7.12
%


11/27/2018



1/1/2024



3,766



3,738



3,738Web.com Group, Inc.(2)(11)

Software


L+375







6.17
%


9/17/2018



10/10/2025



9,000



8,978



8,685WIRB-Copernicus Group, Inc.(2)(11)(14)

Professional Services


L+425



1.00
%


6.77
%


3/27/2017



8/15/2022



11,524



11,471



11,524Total Bank Debt/Senior Secured Loans


$
354,303


$
350,403Common Equity/Equity Interests/Warrants  38.1%
















Shares/UnitsEngineering Solutions & Products, LLC(6)(9)(11)

Aerospace & Defense














11/5/2013







133,668


$
1,367


$
68Essence Group Holdings Corporation (Lumeris) Warrants(11). ..

Health Care Technology














3/22/2017







52,000



16



89Gemino Healthcare Finance, LLC(4)(5)(11)

Diversified Financial Services














9/30/2013







32,839



31,439



32,550North Mill Capital LLC(4)(5)(11)(12)

Diversified Financial Services














10/20/2017







131



67,000



67,000Restoration Robotics, Inc. Warrants(11)

Health Care Equipment & Supplies














5/10/2018







16,173



25



1TwentyEighty Investors, LLC(11).

Professional Services














1/31/2017







17,214



3,167



Total Common Equity/Equity Interests/Warrants


$
103,014


$
99,708Total Investments(10)
172.2%


$
457,317


$
450,111Liabilities in Excess of Other Assets (72.2%)







(188,719
)NetAssets 100.0%






$
261,392 See notes to consolidated financial statements.  85




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) December 31, 2018 (in thousands)  (1)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of December 31, 2018. (2)
Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned
financing subsidiary SUNS SPV LLC (the SUNS SPV). Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (the Credit Facility) (see Note 7 to the consolidated financial statements) and
are not generally available to creditors, if any, of the Company. (3)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR
or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor. (4)
Indicates assets that the Company believes may not represent qualifying assets under
Section 55(a) of the Investment Company Act of 1940 (1940 Act), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making
follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of December 31, 2018, on a fair value
basis, non-qualifying assets in the portfolio represented 25.5% of the total assets of the Company. (5)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies
of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended
December 31, 2018 in these controlled investments are as follows:  Name of Issuer

Fair Value atDecember 31,2017


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain(Loss)


Dividend/OtherIncome


Fair Value atDecember 31,2018First Lien Loan Program LLC (15)

$
35,835


$
5,521


$
42,980


$
(3,209
)

$
(1,585
)

$
2,889


$
Gemino Healthcare Finance, LLC


35,050







1,400







(1,100
)


3,498



32,550North Mill Capital LLC


51,000



16,000















5,703



67,000$
121,885


$
21,521


$
44,380


$
(3,209
)

$
(2,685
)

$
12,090


$
99,550  (6)
Denotes investments in which we are an Affiliated Person but not exercising a controlling
influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended
December 31, 2018 in these affiliated investments are as follows:  Name of Issuer

Fair Value atDecember 31,2017


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain(Loss)


Interest/Dividend/OtherIncome


Fair Value atDecember 31,2018Engineering Solutions & Products, LLC
(1st lien)






602



602











54



Engineering Solutions & Products, LLC
(2nd lien)


2,145



76



226







238



329



2,282Engineering Solutions & Products, LLC (equity interests)


68























68$
2,213


$
678


$
828


$



$
238


$
383


$
2,350  (7)
Coupon is 4.00% Cash / 4.00% PIK. (8)
Coupon is 0.25% Cash / 8.75% PIK. (9)
Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a
taxable consolidated subsidiary. (10)
Aggregate net unrealized depreciation for federal income tax purposes is $10,007; aggregate gross unrealized
appreciation and depreciation for federal tax purposes is $1,362 and $11,369, respectively, based on a tax cost of $460,118. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of
1933, as amended (the Securities Act).    These investments are generally subject to certain limitations on resale, and may be deemed to be restricted securities under the Securities Act. (11)
Level 3 investment valued using significant unobservable inputs. (12)
Our equity investment in North Mill Capital LLC is partially held through ESP SSC Corporation, a taxable
consolidated subsidiary. (13)
Spread is 3.00% Cash / 3.00% PIK. (14)
Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned
financing subsidiary FLLP 2015-1 LLC (the FLLP SPV). Such investments are pledged as collateral under the FLLP 2015-1, LLC Revolving Credit Facility (see
Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company. (15)
On September 18, 2018, the Company acquired 100% of the equity of FLLP and as such consolidated this
investment as of this date. On December 19, 2018, FLLP was merged into the Company.     Non-income
producing security.     Investment
contains a payment-in-kind
(PIK) feature.  See notes to
consolidated financial statements.  86




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) December 31, 2018 Industry Classification

Percentage of TotalInvestments (atfair value) as ofDecember 31, 2018Diversified Financial Services (includes Gemino Healthcare Finance, LLC and North Mill Capital
LLC)


22.1
%Health Care Providers & Services


15.8
%Professional Services


11.8
%Insurance


11.2
%Software


10.6
%Communications Equipment


5.5
%Media


3.2
%Electronic Equipment, Instruments & Components


3.1
%Wireless Telecommunication Services


2.6
%Chemicals


2.6
%Consumer Finance


2.5
%Commercial Services & Supplies


2.5
%Pharmaceuticals


1.6
%Air Freight & Logistics


1.3
%Footwear


1.3
%Specialty Retail


1.0
%Aerospace & Defense


0.5
%Health Care Equipment & Supplies


0.5
%Diversified Consumer Services


0.3
%Health Care Technology


0.0
%Total Investments


100.0
%  See notes to consolidated financial
statements.  87




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS December 31, 2017 (in thousands, except share/unit amounts)  Description

Industry

SpreadaboveIndex (3)


LiborFloor


Interest   Rate (1)


Acquisition   Date


MaturityDate


ParAmount


Cost


FairValueBank Debt/Senior Secured Loans  105.9%1A Smart Start LLC(2)(14)

Electrical Equipment, Instruments &
Components


L+450



1.00
%


6.19
%


12/21/2017



2/21/2022


$
6,105


$
6,089


$
6,089Acrisure, LLC(2)

Insurance


L+425



1.00
%


5.65
%


5/3/2017



11/22/2023



7,446



7,429



7,531Advantage Sales and Marketing, Inc.

Professional Services


L+650



1.00
%


7.88
%


2/14/2013



7/25/2022



8,000



7,961



7,520Aegis Toxicology Sciences Corporation(14)

Health Care Providers & Services


L+850



1.00
%


10.17
%


2/20/2014



8/24/2021



4,000



3,965



3,880Alera Group Intermediate Holdings, Inc.(2)(14)

Insurance


L+550



1.00
%


6.85
%


11/28/2016



12/30/2022



4,279



4,241



4,257American Teleconferencing Services, Ltd. (PGI) (2)(14)

Communications Equipment


L+650



1.00
%


7.90
%


5/5/2016



12/8/2021



14,933



14,269



14,710Anesthesia Consulting & Management, LP (2)(14)

Health Care Providers & Services


L+625



1.00
%


7.94
%


10/20/2016



10/31/2022



4,530



4,492



4,258Capstone Logistics Acquisition, Inc.(2)(14)

Professional Services


L+450



1.00
%


6.07
%


10/3/2014



10/7/2021



8,159



8,111



8,078Confie Seguros Holding II Co.(2)(14)

Insurance


L+525



1.00
%


6.73
%


10/13/2016



4/19/2022



9,900



9,820



9,909Empower Payments Acquisition, Inc. (RevSpring).(2)(14)

Professional Services


L+550



1.00
%


7.19
%


11/28/2016



11/30/2023



4,579



4,499



4,579Engineering Solutions & Products, LLC(6)(14)

Aerospace & Defense


L+600



2.00
%


8.00
%


11/5/2013



11/5/2018



2,258



2,258



2,145Falmouth Group Holdings Corp. (AMPAC) (2)(14)

Chemicals


L+675



1.00
%


8.44
%


12/15/2016



12/14/2021



8,668



8,668



8,668GenMark Diagnostics, Inc(2)(4)(14)

Health Care Providers & Services










6.90
%


4/22/2016



10/12/2019



7,633



8,040



8,039Global Holdings LLC & Payment Concepts LLC(2)(14)

Consumer Finance


L+650



1.00
%


7.99
%


3/31/2017



5/5/2022



9,341



9,173



9,341Global Tel*Link Corporation(2)

Communications Equipment


L+400



1.25
%


5.69
%


11/6/2015



5/23/2020



3,364



3,118



3,381Global Tel*Link Corporation

Communications Equipment


L+825



1.25
%


9.94
%


5/21/2013



11/23/2020



3,000



2,972



3,007Hostway Corporation(2)(14)

Internet Software & Services


L+475



1.25
%


8.44
%


6/27/2014



12/13/2019



8,526



8,511



8,185Island Medical Management Holdings, LLC(2)(14)

Health Care Providers & Services


L+550



1.00
%


7.00
%


3/31/2017



9/1/2022



4,570



4,528



4,432Kellermeyer Bergensons Services, LLC (KBS)(2)(14)

Commercial Services & Supplies


L+500



1.00
%


6.48
%


10/31/2014



10/29/2021



4,850



4,821



4,850LegalZoom.com, Inc.(2)(14)

Internet Software & Services


L+450



1.00
%


5.94
%


11/17/2017



11/21/2024



5,000



4,950



4,950Logix Holding Company, LLC(2)(14)

Communications Equipment


L+575



1.00
%


7.28
%


8/11/2017



12/22/2024



10,800



10,692



10,692Lumeris Solutions Company, LLC(2)(14)

Health Care Technology


L+860



0.25
%


9.98
%


3/22/2017



2/1/2020



4,000



4,037



4,040Metamorph US 3, LLC (Metalogix)(2)(14) 

Software


L+750
(7)


1.00
%


9.07
%


12/1/2014



12/1/2020



7,953



7,848



5,805Meter Readings Holding, LLC (Aclara)(2)(14)

Electronic Equipment, Instruments & Components


L+575



1.00
%


7.23
%


6/15/2017



8/29/2023



7,940



7,921



7,940MHE Intermediate Holdings, LLC (TFS-Miner)(2)(14)

Air Freight & Logistics


L+500



1.00
%


6.69
%


3/8/2017



3/10/2024



5,460



5,410



5,405Ministry Brands, LLC(2)(14)

Software


L+500



1.00
%


6.38
%


11/21/2016



12/2/2022



9,636



9,557



9,636MRI Software LLC(2)(14)

Software


L+625



1.00
%


7.83
%


6/7/2017



6/30/2023



8,224



8,147



8,183MYI Acquiror Corp. (McLarens Young)(2)(14)

Insurance


L+450



1.25
%


5.83
%


5/21/2014



5/28/2019



3,348



3,337



3,348MYI Acquiror Ltd. (McLarens Young)(2)(4)(14)

Insurance


L+450



1.25
%


5.84
%


5/21/2014



5/28/2019



4,271



4,258



4,271On Location Events, LLC & PrimeSport Holdings Inc.(2)(14)

Media


L+550



1.00
%


7.04
%


12/7/2017



9/29/2021



15,000



14,815



14,812PetVet Care Centers, LLC(2)(14)

Health Care Facilities


L+600



1.00
%


7.35
%


6/1/2017



6/8/2023



10,332



10,235



10,435Polycom, Inc.(2)(14)

Communications Equipment


L+525



1.00
%


6.72
%


9/29/2016



9/27/2023



11,811



11,411



11,933PPT Management Holdings, LLC(2)(14)

Health Care Providers & Services


L+600



1.00
%


9.50
%


12/15/2016



12/16/2022



7,920



7,854



7,603PSP Group, LLC (Pet Supplies Plus)(2)(8)(14)

Specialty Retail


L+475



1.00
%


6.32
%


4/2/2015



4/6/2021



482



479



482QBS Holding Company, Inc. (Quorum)(2)(14)

Software


L+475



1.00
%


6.13
%


8/1/2014



8/7/2021



6,059



6,025



6,014Salient Partners, L.P.(2)(14)

Asset Management


L+850



1.00
%


9.85
%


6/10/2015



6/9/2021



3,932



3,882



3,932SHO Holding I Corporation (Shoes for Crews)(2)(14)

Footwear


L+500



1.00
%


6.42
%


11/20/2015



10/27/2022



5,880



5,839



5,762Suburban Broadband, LLC (Jab Wireless, Inc.)(2)(14)

Wireless Telecommunication Services


L+650
(15)


1.00
%


8.19
%


11/29/2016



3/26/2019



4,938



4,911



4,938The Hilb Group, LLC & Gencorp Insurance Group, Inc.(2)(14)

Insurance


L+475



1.00
%


6.44
%


3/16/2016



6/24/2021



4,436



4,377



4,436Trident USA Health Services (2)(14)

Health Care Providers & Services


L+575



1.25
%


7.44
%


7/29/2013



7/31/2019



8,693



8,670



7,389TwentyEighty, Inc.(14) 

Professional Services


L+800
(9)


1.00
%


9.42
%


1/31/2017



3/31/2020



918



887



918TwentyEighty, Inc.(14) 

Professional Services










8.00
%(10)


1/31/2017



3/31/2020



1,984



1,894



1,865TwentyEighty, Inc.(14) 

Professional Services










9.00
%(11)


1/31/2017



3/31/2020



1,814



1,733



1,651U.S. Acute Care Solutions, LLC(2)(14)

Health Care Providers & Services


L+500



1.00
%


6.69
%


12/22/2016



5/15/2021



6,435



6,384



6,371VT Buyer Acquisition Corp. (Veritext)(2)(14)

Professional Services


L+475



1.00
%


6.44
%


2/17/2017



1/29/2022



5,983



5,957



5,953WIRB-Copernicus Group, Inc.(2)(14)

Professional Services


L+500



1.00
%


6.69
%


3/27/2017



8/15/2022



4,466



4,447



4,466Total Bank Debt/Senior Secured Loans


$
288,923


$
286,089Common Equity/Equity Interests/Warrants  45.2%











Shares/UnitsEngineering Solutions & Products, LLC(6)(12)(14)

Aerospace & Defense














11/5/2013







133,668


$
1,367


$
68Essence Group Holdings Corporation (Lumeris) Warrants(14)

Health Care Technology














3/22/2017







52,000



16



39First Lien Loan Program LLC(4)(5)(14)

Asset Management














2/13/2015











37,459



35,835Gemino Healthcare Finance, LLC(4)(5)(14)

Diversified Financial Services














9/30/2013







32,839



32,839



35,050NorthMill LLC(4)(5)(14)(16)

Diversified Financial Services














10/20/2017







100



51,000



51,000TwentyEighty Investors, LLC(14)

Professional Services














1/31/2017







17,214



3,167



Total Common Equity/Equity Interests/Warrants


$
125,848


$
121,992Total Investments(13)
151.1%


$
414,771


$
408,081Cash Equivalents  38.8%


















Par AmountU.S. Treasury Bill

Government














12/28/2017



2/8/2018



105,000


$
104,874


$
104,874Total Investments & Cash Equivalents 189.9%


$
519,645


$
512,955Liabilities in Excess of Other Assets (89.9%)







(242,824
)Net Assets  100.0%






$
270,131 See notes to consolidated financial statements.  88




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) December 31, 2017 (in thousands)  (1)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of December 31, 2017. (2)
Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned
financing subsidiary SUNS SPV LLC (the SPV). Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to
creditors, if any, of Solar Senior Capital Ltd. The respective par amount for the investment partially held through the SPV is $3,673 for Genmark Diagnostics, Inc. The par balance in excess of this stated amount is held directly by Solar Senior
Capital Ltd. (3)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR
or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor. (4)
Indicates assets that the Company believes may not represent qualifying assets under
Section 55(a) of the Investment Company Act of 1940 (1940 Act), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making
follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of December 31, 2017, on a fair value
basis, non-qualifying assets in the portfolio represented 25.7% of the total assets of the Company. (5)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies
of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended
December 31, 2017 in these controlled investments are as follows:  Name of Issuer

Fair Value atDecember 31,2016


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain(Loss)


Dividend/OtherIncome


Fair Value atDecember 31,2017FLLP

$
38,810


$
2,835


$
6,563


$



$
753


$
4,129


$
35,835Gemino Healthcare Finance, LLC


35,500















(450
)


3,694



35,050NorthMill LLC






51,000















1,122



51,000$
74,310


$
53,835


$
6,563


$



$
303


$
8,945


$
121,885  (6)
Denotes investments in which we are an Affiliated Person but not exercising a controlling
influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended
December 31, 2017 in these affiliated investments are as follows:  Name of Issuer

Fair Value atDecember 31,2016


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain(Loss)


Interest/DividendIncome


Fair Value atDecember 31,2017Engineering Solutions & Products, LLC
(1st lien)






2,257



2,257











11



Engineering Solutions & Products, LLC
(2nd lien)


1,757















473



190



2,145Engineering Solutions & Products, LLC (equity interests)


68























68$
1,825


$



$



$



$
473


$
201


$
2,213  (7)
Spread is 5.50% Cash / 2.00% PIK. (8)
PSP Group, LLC, PSP Service Newco, Inc., PSP Subco, LLC, PSP Stores, LLC, and PSP Distribution, LLC are co-borrowers. (9)
Spread is 3.50% Cash / 4.50% PIK. (10)
Coupon is 1.00% Cash / 7.00% PIK. (11)
Coupon is 0.25% Cash / 8.75% PIK. (12)
Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a
taxable consolidated subsidiary. (13)
Aggregate net unrealized depreciation for federal income tax purposes is $9,267; aggregate gross unrealized
appreciation and depreciation for federal tax purposes is $3,219 and $12,486, respectively, based on a tax cost of $417,348. (14)
Investment valued using significant unobservable inputs. (15)
Spread is 4.50% Cash / 2.00% PIK. (16)
Our equity investment in NorthMill LLC is partially held through ESP SSC Corporation, a taxable consolidated
subsidiary. 
Non-income producing security. 
Investment contains a
payment-in-kind (PIK) feature. See notes to consolidated financial statements.  89




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SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) December 31, 2017 Industry Classification

Percentage of TotalInvestments (atfair value) as ofDecember 31,2017Diversified Financial Services (includes Gemino Healthcare Finance, LLC and NorthMill
LLC)


21.1
%Communications Equipment


10.7
%Health Care Providers & Services


10.3
%Asset Management (includes FLLP)


9.8
%Professional Services


8.6
%Insurance


8.3
%Software


7.3
%Media


3.6
%Electronic Equipment, Instruments & Components


3.4
%Internet Software & Services


3.2
%Health Care Facilities


2.6
%Consumer Finance


2.3
%Chemicals


2.1
%Footwear


1.4
%Air Freight & Logistics


1.3
%Wireless Telecommunication Services


1.2
%Commercial Services & Supplies


1.2
%Health Care Technology


1.0
%Aerospace & Defense


0.5
%Specialty Retail


0.1
%Total Investments


100.0
% See notes to consolidated financial statements.  90




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2018 (in thousands, except share amounts) Note 1. Organization Solar Senior
Capital Ltd. (Solar Senior, the Company, SUNS, we, us, or our), a Maryland corporation formed on December 16, 2010, is a closed-end,
externally managed, non-diversified management investment company that has elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940 (the 1940
Act). Furthermore, as the Company is an investment company, it continues to apply the guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946. In addition, for tax
purposes, we have elected to be treated, and intend to qualify annually, as a regulated investment company (RIC), under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). On January 28, 2011, Solar Senior was capitalized with initial equity of $2 and commenced operations. On February 24, 2011, Solar
Senior priced its initial public offering, selling 9.0 million shares, including the underwriters over-allotment, raising approximately $168,000 of net proceeds. Concurrent with this offering, our senior management team purchased an
additional 500,000 shares through a private placement, raising another $10,000. The Companys investment objective is to seek to
maximize current income consistent with the preservation of capital. We seek to achieve our investment objective by investing directly or indirectly in senior secured loans, including first lien, stretch-senior, unitrache, and second lien debt
instruments, made primarily to leveraged private middle-market companies whose debt is rated below investment grade, which the Company refers to collectively as senior loans. From time to time, we may also invest in public companies that
are thinly traded. Under normal market conditions, at least 80% of the value of the Companys net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans. Note 2. Significant Accounting Policies The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting
principles generally accepted in the United States of America (GAAP), and include the accounts of the Company and certain wholly-owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications
which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain
prior period amounts may have been reclassified to conform to current period presentation. The preparation of consolidated financial
statements in conformity with GAAP and pursuant to the requirements for reporting on Form 10-K and Regulation S-X, as appropriate, also requires management to make
estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial
markets and any other parameters used in determining these estimates could cause actual results to differ materially. In the opinion of
management, all adjustments which are of a normal recurring nature considered necessary for the fair presentation of financial statements, have been included. The significant accounting policies consistently followed by the Company are:  (a)
Investment transactions are accounted for on the trade date;  91




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  (b)
The Company conducts the valuation of its assets in accordance with GAAP and the 1940 Act. The Company
generally values its assets on a quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closing price on the date of valuation. The Company may also obtain
quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to GAAP to determine the fair value of
the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair
value, unless such valuation, in the judgment of Solar Capital Partners, LLC (the Investment Adviser), does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under
the direction of the Companys board of directors (the Board). Investments for which reliable market
quotations are not readily available or for which the pricing sources do not provide a valuation or methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, shall
be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuations are discussed with senior management of the Investment
Adviser; (iii) independent valuation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Advisers preliminary valuations and make their own independent assessment for (a) each
portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each
portfolio investment that is presently in payment default and the Investment Adviser does not expect to reach an agreement with the portfolio company in the subsequent quarter; (iv) the Board will discuss the valuations and determine the fair
value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate, the respective independent valuation firm. The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; the nature and
realizable value of any collateral; the portfolio companys ability to make payments; the portfolio companys earnings and discounted cash flow; the markets in which the issuer does business; and comparisons to publicly traded securities,
among others. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will
consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may
differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. The market approach uses prices and other
relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to  92




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of
factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples,
security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio companys ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does
business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input
in the valuation process. For the fiscal year ended December 31, 2018, there has been no change to the Companys valuation approaches or techniques and the nature of the related inputs considered in the valuation process. ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy: Level1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the
measurement date. Level2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for
identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices. Level3: Unobservable inputs for the asset or liability. In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The
exercise of judgment is based in part on our knowledge of the asset class and our prior experience.  (c)
Gains or losses on investments are calculated by using the specific identification method.  (d)
The Company records dividend income and interest, adjusted for amortization of premium and accretion of
discount, on an accrual basis. Loan origination fees, original issue discount, and market discounts are capitalized and we amortize such amounts into income using the effective interest method or on a straight-line basis, as applicable. Upon the
prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record call premiums on loans repaid as interest income when we receive such amounts. Capital structuring fees, amendment fees, consent fees, and any
other non-recurring fee income as well as management fee and other fee income for services rendered, if any, are recorded as other income when earned.  (e)
The Company intends to comply with the applicable provisions of the Code pertaining to regulated investment
companies to make distributions of taxable income sufficient to relieve it of substantially all U.S. federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise
tax on this income. The Company will accrue excise tax on such estimated excess taxable income as appropriate.  93




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  (f)
Book and tax basis differences relating to stockholder distributions and other permanent book and tax
differences are typically reclassified among the Companys capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP; accordingly at
December 31, 2018, $883 was reclassified on our balance sheet between accumulated distributable net loss and paid-in capital in excess of par. Total earnings and net asset value are not affected.  (g)
Distributions to common stockholders are recorded as of the record date. The amount to be paid out as a
distribution is determined by the Board. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.  (h)
In accordance with Regulation S-X and ASC Topic
810Consolidation, the Company consolidates its interest in controlled investment company subsidiaries, financing subsidiaries and certain wholly-owned holding companies that serve to facilitate investment in portfolio companies. In
addition, the Company may also consolidate any controlled operating companies substantially all of whose business consists of providing services to the Company.  (i)
The accounting records of the Company are maintained in U.S. dollars. Any assets and liabilities denominated in
foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against the U.S. dollar on the date of valuation. The Company will not isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain or loss from investments. The Companys investments in
foreign securities, if any, may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the
investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments in terms of U.S. dollars and therefore the earnings of the Company.  (j)
The Company made an irrevocable election to apply the fair value option of accounting to the FLLP Facility, in
accordance with ASC 825-10.  (k)
In accordance with ASC 835-30, the Company records origination and
other expenses related to certain debt issuances, if any, as a direct deduction from the carrying amount of the debt liability. These expenses are deferred and amortized using either the effective interest method or the straight-line method over the
stated life. The straight-line method may be used on revolving facilities and/or when it approximates the effective yield method.  (l)
The Company records expenses related to shelf registration statements and applicable equity offering costs as
prepaid assets. These expenses are typically charged as a reduction of capital upon utilization, in accordance with ASC 946-20-25. Certain subsequent costs are expensed
per the AICPA Audit & Accounting Guide for Investment Companies.  (m)
Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in  94




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  managements judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on such investments may be recognized as
income or applied to principal depending on managements judgment.  (n)
The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and
so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less would qualify, with limited exceptions. The Company believes
that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents. Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework
 Changes to the Disclosure Requirements for Fair Value Measurement.    The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts
in the Concepts Statement, including the consideration of costs and benefits.    ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019.    Early adoption is permitted.    The Company is evaluating the impact of ASU 2018-13 on its consolidated financial statements
and disclosures. In August 2018, the US Securities and Exchange Commission adopted final rules to eliminate redundant, duplicative,
overlapping, outdated or superseded disclosure requirements in light of other disclosure requirements, GAAP or changes in the information environment. These rules amend certain provisions of Regulation S-X and
Regulation S-K, certain rules promulgated under the Securities Act of 1933 and the Securities Exchange Act of 1934 and certain related forms.    These changes became effective on
November 5, 2018. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows,
which amends FASB ASC 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. For public business entities, the amendments were effective for
fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has adopted ASU 2016-18 and determined that the adoption has not had a material impact on its
consolidated financial statements and disclosures. In March 2017, the FASB issued ASU 2017-08,
Premium Amortization on Purchased Callable Debt Securities, which will amend FASB ASC 310-20. The amendments in this Update shorten the amortization period for certain callable debt securities held at a
premium, generally requiring the premium to be amortized to the earliest call date.    For public business entities, the amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of ASU 2017-08 on its consolidated financial statements and disclosures.  95




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  In May 2014, the FASB issued ASC 606, Revenue From Contracts With Customers, originally
effective for public business entities with annual reporting periods beginning after December 15, 2016. On August 12, 2015, the FASB issued an ASU, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which
deferred the effective date of ASC 606 for one year. ASC 606 provides accounting guidance related to revenue from contracts with customers. For public business entities, ASC 606 was effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2017. The Company has adopted ASC 606 and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures. Note 3. Agreements Solar Senior has an
Advisory Agreement with the Investment Adviser, under which the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to,
Solar Senior. For providing these services, the Investment Adviser receives a fee from Solar Senior, consisting of two componentsa base management fee and a performance-based incentive fee. The base management fee is calculated at an annual
rate of 1.00% of gross assets. For services rendered under the Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two
most recently completed calendar quarters. Base management fees for any partial month or quarter will be appropriately pro-rated. For purposes of computing the base management fee, gross assets exclude
temporary assets acquired at the end of each fiscal quarter for purposes of preserving investment flexibility in the next fiscal quarter. Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government or
government agency securities, repurchase agreements or cash borrowings. The performance-based incentive fee has two parts, as follows:
one is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose,
pre-incentive fee net investment income means interest income, dividend income and any other income (other than fees for providing managerial assistance) accrued during the calendar quarter, minus our
operating expenses for the quarter (excluding the performance-based incentive fee). Pre-incentive fee net investment income includes, in the case of investments, if any, with a deferred interest feature (such
as original issue discount, debt instruments with pay-in-kind interest and zero-coupon securities), accrued income that we have
not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains or losses or unrealized capital appreciation or depreciation.
Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter
(7.00% annualized). The Company pays the Investment Adviser a performance-based incentive fee with respect to pre-incentive fee net investment income for each calendar quarter as follows:  

no performance-based incentive fee in any calendar quarter in which our
pre-incentive fee net investment income does not exceed the hurdle of 1.75%;  

50% of pre-incentive fee net investment income with respect to that
portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.9167% in any calendar quarter (11.67% annualized); and  

20% of the amount of pre-incentive fee net investment income, if any,
that exceeds 2.9167% in any calendar quarter (11.67% annualized) will be payable to the Investment Adviser.  96




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  The second part of the performance-based incentive fee is determined and payable in arrears
as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of the Companys cumulative realized capital gains less cumulative realized capital losses, unrealized
capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all net capital gains upon which prior
performance-based capital gains incentive fee payments were previously made to the Investment Adviser. For financial statement purposes, the second part of the performance-based incentive fee is accrued based upon 20% of cumulative net realized
gains and net unrealized capital appreciation. No accrual was required for the fiscal years ended December 31, 2018, 2017 and 2016. For the fiscal years ended December 31, 2018, 2017 and 2016, the Company recognized $4,603, $3,861 and $3,385, respectively, in gross
base management fees and $2,922, $1,083 and $1,560, respectively, in gross performance-based incentive fees. For the fiscal years ended December 31, 2018, 2017 and 2016, $0, $1,962 and $797, respectively, of such base management fees were
waived. For the fiscal years ended December 31, 2018, 2017 and 2016, $1,107, $709 and $1,205, respectively, of such performance-based incentive fees were waived. For the fiscal years ended December 31, 2018, 2017 and 2016, there were $153,
$0 and $0, respectively, of performance-based incentive fees recaptured by the Investment Adviser. Any fee waivers prior to July 1, 2017 are not subject to recapture. Subsequent voluntary fee waivers were made at the Investment Advisers
discretion and are subject to recapture by the Investment Adviser and reimbursement by the company under the conditions noted below. No fees will be recouped by the Investment Adviser if (i) for the period in which recoupment occurs, the ratio
of operating expenses to average net assets, when considering the reimbursement, exceeds the same ratio for the period in which the waiver occurred; (ii) for the period in which recoupment occurs, the annualized distribution rate cannot fall
below the annualized distribution rate for the period in which the waiver occurred; and (iii) recoupment can only occur within three years from the date of the waiver. The table below presents a summary of fees waived that may be subject to
recoupment:  Three Months
Ended

ManagementandPerformance-Based IncentiveFees Waived


Management andPerformance-BasedIncentive FeesRecouped


UnreimbursedManagementandPerformance-BasedIncentive Fees


Ratio ofOperatingExpense toAverageNet Assetsfor thePeriod(1)


AnnualizedDistributionRate for thePeriod(2)


Eligiblefor RecoupmentThroughSeptember 30, 2017

$
712


$



$
712



0.32
%


8.40
%

June 30, 2019December 31, 2017


281







281



0.33
%


8.39
%

September 30, 2019March 31, 2018


308







308



0.28
%


8.37
%

December 31, 2019June 30, 2018


437



153



284



0.30
%


8.37
%

March 31, 2020December 31, 2018


362







362



0.20
%


8.38
%

September 30, 2020Total

$
2,100


$
153


$
1,947  (1)
Operating expense includes all expenses borne by the Company, except for organizational and offering costs,
base management fees, performance-based incentive fees and interest expense. (2)
Annualized distribution rate equals the annualized rate of distributions paid to stockholders based on the
amount of the distributions declared prior to the date that the waivers of expenses related to management and performance-based incentive fees were incurred. Solar Senior has also entered into an Administration Agreement with Solar Capital Management, LLC (the Administrator) under which
the Administrator provides administrative services for Solar Senior. For providing these services, facilities and personnel, Solar Senior reimburses the Administrator for Solar Seniors allocable  97




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The Administrator will also provide, on
Solar Seniors behalf, managerial assistance to those portfolio companies to which Solar Senior is required to provide such assistance. The Company typically reimburses the Administrator on a quarterly basis. For the fiscal years ended December 31, 2018, 2017 and 2016, the Company recognized expenses under the Administration Agreement of
$1,529, $1,554 and $1,245, respectively. No managerial assistance fees were accrued or collected for the fiscal years ended December 31, 2018, 2017 and 2016. Note 4. Net Asset Value Per Share At December 31, 2018, the Companys total net assets and net asset value per share were $261,392 and $16.30, respectively. This
compares to total net assets and net asset value per share at December 31, 2017 of $270,131 and $16.84, respectively. Note 5. Earnings Per
Share The following table sets forth the computation of basic and diluted net increase in net assets per share resulting from
operations, pursuant to ASC 260-10, for the years ended December 31, 2018, 2017 and 2016:  Year endedDecember 31,2018


Year endedDecember 31,2017


Year endedDecember 31,2016Earnings per share (basic & diluted)Numeratornet increase in net assets resulting from operations:

$
13,813


$
23,386


$
24,252Denominatorweighted average shares:


16,040,060



16,031,303



12,869,937Earnings per share:

$
0.86


$
1.46


$
1.88 Note 6. Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used
to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair
value hierarchy are as follows: Level1. Financial assets and liabilities whose values are based on
unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access. Level2. Financial assets and liabilities whose values are based on quoted prices in markets that are not
active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:  a)
Quoted prices for similar assets or liabilities in active markets;  b)
Quoted prices for identical or similar assets or liabilities in
non-active markets;  98




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  c)
Pricing models whose inputs are observable for substantially the full term of the asset or liability; and  d)
Pricing models whose inputs are derived principally from or corroborated by observable market data through
correlation or other means for substantially the full term of the asset or liability. Level3.Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect managements and, if
applicable, an independent third-party valuation firms own assumptions about the assumptions a market participant would use in pricing the asset or liability. When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is
categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable
(Level 3). Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair
value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). A review of fair
value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Such reclassifications are reported as transfers in/out
of the appropriate category as of the end of the quarter in which the reclassifications occur. The following tables present the balances
of assets and liabilities measured at fair value on a recurring basis, as of December 31, 2018 and December 31, 2017: Fair
Value Measurements As of December 31, 2018  Level 1


Level 2


Level 3


TotalAssets:Bank Debt/Senior Secured Loans

$



$
8,589


$
341,814


$
350,403Common Equity/EquityInterests/Warrants










99,708



99,708Total Investments

$



$
8,589


$
441,522


$
450,111Liabilities:FLLP Facility

$



$



$
51,371


$
51,371  99




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  Fair Value Measurements As of December 31, 2017  Level 1


Level 2


Level 3


Measuredat NetAssetValue*


TotalAssets:Bank Debt/Senior Secured Loans

$



$
21,439


$
264,650


$



$
286,089Common Equity/EquityInterests/Warrants










86,157



35,835



121,992Total Investments

$



$
21,439


$
350,807


$
35,835


$
408,081Liabilities:Credit Facility

$



$



$
124,200


$



$
124,200  *
In accordance with ASC 820-10, certain investments that are measured
using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair
value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities. The portfolio investment in this category is FLLP.    See Note 11 for more information on this investment, including its
investment strategy and the Companys unfunded equity commitment to FLLP. This investment is not redeemable by the Company absent an election by the members of the entity to liquidate all investments and distribute the proceeds to the members. The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the year
ended December 31, 2018, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2018: Fair Value Measurements Using Level 3 Inputs  Bank Debt/SeniorSecured Loans


CommonEquity/EquityInterests/Warrants


TotalFair value, December 31, 2017

$
264,650


$
86,157


$
350,807Total gains or losses included in earnings:Net realized gain (loss)


(5,218
)






(5,218
)Net change in unrealized gain (loss)


(1,052
)


(1,073
)


(2,125
)Purchase of investment securities


168,768



16,024



184,792Proceeds from dispositions of investment securities


(176,482
)


(1,400
)


(177,882
)Transfers in/out of Level 3


91,148







91,148Fair value, December 31, 2018

$
341,814


$
99,708


$
441,522Unrealized gains (losses) for the period relating to those Level 3 assets that were still
held by the Company at the end of the period:Net change in unrealized gain (loss):

$
(1,053
)

$
(1,073
)

$
(2,126
)  100




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  During the quarter ended June 30, 2018, Advantage Sales and Marketing Inc. was
transferred from Level 2 to Level 3. At June 30, 2018, the Investment Adviser believed that the available quote for Advantage Sales and Marketing Inc. was no longer representative of fair value. However, the quote was still considered
as an input to the fair value determination. As such, Advantage Sales and Marketing Inc. was transferred from Level 2 to Level 3 as the Investment Adviser could no longer rely on the available quote from a third-party source and was using
additional assumptions in fair valuing the investment. During the quarter ended September 30, 2018, the Companys investment in FLLP was consolidated, and as such the Level 3 assets held by FLLP are reflected as transfers into Level
3. During the quarter ended December 31, 2018, Pre-Paid Legal Services, Inc. was transferred from Level 3 to Level 2 as the Investment Adviser believed that there was ample liquidity in the
available quote given known transactions and thus believed the quote to be representative of fair value. The following table shows a
reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the year ended December 31, 2018:  Beginning fair value at December 31, 2017

$
124,200Borrowings


30,950Repayments


(29,376
)Transfers in/out of Level 3


(74,403
)Ending fair value at December 31, 2018

$
51,371 The Company made an irrevocable election to apply the fair value option of accounting to the FLLP Facility, in
accordance with ASC 825-10. On December 31, 2018, there were borrowings of $51,371 on the FLLP Facility. For the year ended December 31, 2018, the FLLP Facility had no net change in unrealized
(appreciation) depreciation. As a result of the consolidation of FLLP, the FLLP Facility is shown as a transfer into Level 3. The
Company did not elect to apply the fair value option of accounting to the Credit Facility, which was refinanced by way of amendment on June 1, 2018. As this refinancing was deemed to be a significant modification of debt, per ASC 825-10-25, a new election date was triggered. As such the Credit Facility is shown as a transfer out of Level 3.  101




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  The following table provides a summary of the changes in fair value of Level 3 assets
and liabilities for the year ended December 31, 2017, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2017: Fair Value Measurements Using Level 3 Inputs  Bank Debt/SeniorSecured Loans


CommonEquity/EquityInterests/WarrantsFair value, December 31, 2016

$
250,268


$
35,568Total gains or losses included in earnings:Net realized gain (loss)


129



Net change in unrealized gain (loss)


3,436



(3,593
)Purchase of investment securities


132,045



54,182Proceeds from dispositions of investment securities


(137,054
)


Transfers in/out of Level 3


15,826



Fair value, December 31, 2017

$
264,650


$
86,157Unrealized gains (losses) for the period relating to those Level 3 assets that were still
held by the Company at the end of the period:Net change in unrealized gain (loss):

$
3,436


$
(3,593
) During the fiscal year ended December 31, 2017, Securus Technologies, Inc. and nThrive, Inc. were
transferred from Level 2 to Level 3. At June 30, 2017, the Investment Adviser believed that Securus Technologies, Inc. was likely going to be prepaid at par in the near future. As such, the Investment Adviser, in its recommendation to the
Board, provided that it was more representative of fair value to price the position at par, matching the price we would receive if the investment was prepaid. Securus Technologies, Inc. was repaid at par in the quarter ended December 31, 2017.
At March 31, 2017, the Investment Adviser also believed that nThrive, Inc. was likely going to be prepaid in the near future. As such, the Investment Adviser, in its recommendation to the Board, provided that it was more representative of fair
value to price the position at par, matching the price we would receive if the investment was prepaid. nThrive, Inc. was repaid in the quarter ended June 30, 2017. The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant
unobservable inputs (Level 3) for the year ended December 31, 2017:  Beginning fair value at December 31, 2016

$
98,300Borrowings


162,000Repayments


(136,100
)Transfers in/out of Level 3


Ending fair value at December 31, 2017

$
124,200 The Company has made an irrevocable election to apply the fair value option of accounting to the Credit
Facility, in accordance with ASC 825-10. On December 31, 2017, there were borrowings of $124,200 on the Credit Facility. For the year ended December 31, 2017, the Credit Facility had no net change in
unrealized (appreciation) depreciation. The Company used an independent third-party valuation firm to assist in measuring the fair value of the Credit Facility.  102




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  Quantitative Information about Level 3 Fair Value Measurements The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price is
ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms
and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our
investment within each portfolio company. Significant unobservable quantitative inputs typically used in the fair value measurement of
the Companys Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as
enterprise values, returns on equity and earnings before income taxes, depreciation and amortization (EBITDA) multiples of similar companies, and comparable market transactions for equity securities. Quantitative information about the Companys Level 3 asset and liability fair value measurements as of December 31, 2018 is
summarized in the table below:  Asset orLiability

Fair Value atDecember 31,2018


Principal ValuationTechnique/Methodology

Unobservable Input

Range (WeightedAverage)Bank Debt / Senior Secured Loans

Asset

$
341,814


Income Approach

Market Yield

6.9%  25.5% (8.7%)Common Equity/Equity Interests/Warrants

Asset

$$
15899,550


Market ApproachMarket Approach

EBITDA MultipleReturn on Equity

5.8x  14.4x (14.4x)7.5%  25.2% (10.1%)FLLP Facility

Liability

$
51,371


Income Approach

Market Yield

L+1.4%  L+4.8%(L+2.3%) Significant increases or decreases in any of the above unobservable inputs in isolation, including
unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities. Quantitative information about the Companys Level 3 asset and liability fair value measurements as of December 31, 2017 is
summarized in the table below:  Asset orLiability

Fair Value atDecember 31,2017


Principal ValuationTechnique/Methodology

Unobservable Input

Range (WeightedAverage)Bank Debt/ Senior Secured Loans

Asset

$
264,650


Yield Analysis

Market Yield

6.1%  21.6% (8.6%)Common Equity/ Equity Interests/Warrants

Asset

$$
10786,050


Enterprise ValueEnterprise Value

EBITDA MultipleReturn on Equity

5.5x  16.0x (16.0x)5.9%  24.4% (13.4%)Credit Facility

Liability

$
124,200


Yield Analysis

Market Yield

L+1.4%  L+4.8%(L+2.0%)  103




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  Significant increases or decreases in any of the above unobservable inputs in isolation,
including unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities. Note 7. Debt Credit
FacilityOn August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the SUNS SPV) which entered into the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On
January 10, 2017, commitments to the Credit Facility, as amended, were increased from $175,000 to $200,000 by utilizing the accordion feature. The commitment can also be expanded up to $600,000. The stated interest rate on the Credit Facility
is LIBOR plus 2.00% with no LIBOR floor requirement and the current final maturity date is June 1, 2023. The Credit Facility is secured by all of the assets held by SUNS SPV. Under the terms of the Credit Facility, Solar Senior and SUNS SPV, as
applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The
Credit Facility also includes usual and customary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014, May 29, 2015 to extend maturities and add greater investment
flexibility, among other changes. On June 1, 2018, the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. On July 13, 2018,
commitments to the Credit Facility, as amended, were increased from $200,000 to $225,000 by utilizing the accordion feature. FLLP
FacilityOn February 13, 2015, FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly-owned subsidiary of FLLP, as borrower entered into a $75,000 FLLP Facility with Wells Fargo
Securities, LLC acting as administrative agent. Solar Senior Capital Ltd. acts as servicer under the FLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate
of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to
comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of
this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to $100,000 and extending the maturity date to August 16, 2021. On December 19, 2018, the FLLP Facility was amended, reducing commitments to
$75.0 million. There were $51,371 of borrowings outstanding as of December 31, 2018. The Company made an irrevocable election
to apply the fair value option of accounting to the FLLP Facility, in accordance with ASC 825-10. We believe accounting for this facility at fair value better aligns the measurement methodologies of assets and
liabilities, which may mitigate certain earnings volatility.    ASC 825-10 requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated
Statement of Assets and Liabilities and changes in fair value of the above facilities are reported in the Consolidated Statement of Operations. The average annualized interest cost for all borrowings for the year ended December 31, 2018 and the year ended December 31, 2017
was 4.30% and 3.16%, respectively. These costs are exclusive of other credit facility expenses such as unused fees and fees paid to the back-up servicer, if any. The maximum amount borrowed on the revolving
credit facilities during the year ended December 31, 2018 and the year ended December 31, 2017, was $214,296 and $136,000, respectively.  104




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  Note 8. Financial Highlights and Senior Securities Table The following is a schedule of financial highlights for the respective years:  Year endedDecember 31,2018


Year endedDecember 31,2017


Year endedDecember 31,2016


Year endedDecember 31,2015


Year endedDecember 31,2014Per Share Data: (a)Net asset value, beginning of year

$
16.84


$
16.80


$
16.33


$
17.65


$
18.04Net investment income


1.41



1.41



1.42



1.33



1.20Net realized and unrealized gain (loss)


(0.54
)


0.04



0.50



(1.24
)


(0.18
)Net increase (decrease) in net assets resulting from operations


0.87



1.45



1.92



0.09



1.02Distributions to stockholders (see note 9a):From net investment income


(1.41
)


(1.41
)


(1.42
)


(1.41
)


(1.29
)From other sources


















(0.12
)**Offering costs and other










(0.03
)






Net asset value, end of year

$
16.30


$
16.84


$
16.80


$
16.33


$
17.65Per share market value, end of year

$
15.12


$
17.76


$
16.44


$
14.90


$
14.97Total Return(b)


(7.28
%)


17.11
%


20.70
%


8.90
%


(10.47
%)Net assets, end of year

$
261,392


$
270,131


$
269,145


$
188,304


$
203,519Shares outstanding, end of year


16,040,485



16,036,730



16,025,011



11,533,315



11,533,315Ratios to average net assets:Net investment income


8.38
%


8.39
%


8.68
%


7.63
%


6.69
%Operating expenses


3.48
%*


2.12
%*


2.65
%*


2.92
%*


2.50
%*Interest and other credit facility expenses ***


2.89
%


1.43
%


1.56
%


2.08
%


1.52
%Total expenses


6.37
%*


3.55
%*


4.21
%*


5.00
%*


4.02
%*Average debt outstanding

$
168,359


$
100,700


$
109,938


$
136,900


$
72,132Portfolio turnover ratio


42.5
%


41.4
%


38.4
%


34.0
%


47.5
%  (a)
Calculated using the average shares outstanding method. (b)
Total return is based on the change in market price per share during the year and takes into account any
dividends, if any, reinvested in accordance with the dividend reinvestment plan. Total return does not include a sales load. *
The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets is
shown net of a voluntary incentive fee waiver (see note 3). For the year ended December 31, 2018, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.89% and 6.78%, respectively, without
the voluntary management and incentive fee waivers. For the year ended December 31, 2017, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.11% and 4.54%, respectively, without the
voluntary management and incentive fee waivers. For the year ended     December 31, 2016, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.60% and 5.15%,
respectively, without the voluntary management and incentive fee waivers. For the year ended December 31, 2015, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.29% and 5.37%,
respectively, without the voluntary incentive fee waiver. For the year ended December 31, 2014, the ratios of operating expenses to average net assets and total expenses to average net assets would be 2.61% and 4.13%, respectively, without the
voluntary incentive fee waiver. **
Represents tax return of capital. ***
Ratios shown without the non-recurring costs associated with the
amendments of the Credit Facility would be 2.89%, 1.43%, 1.56%, 1.67% and 1.05%, respectively for the years shown.  105




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  Information about our senior securities is shown in the following table as of each year ended
December 31 since the Company commenced operations, unless otherwise noted. The  indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.  Class and Year

Total AmountOutstanding(1)


AssetCoveragePer Unit(2)


InvoluntaryLiquidatingPreferencePer Unit(3)


AverageMarket ValuePer Unit(4)Credit FacilityFiscal 2018

$
119,200


$
1,770


$




N/AFiscal 2017


124,200



3,175







N/AFiscal 2016


98,300



3,738







N/AFiscal 2015


116,200



2,621







N/AFiscal 2014


143,200



2,421







N/AFiscal 2013


61,400



4,388







N/AFiscal 2012


39,100



5,453







N/AFiscal 2011


8,600



21,051







N/AFLLP FacilityFiscal 2018


51,371



762







N/ATotal Senior SecuritiesFiscal 2018

$
170,571


$
2,532


$




N/AFiscal 2017


124,200



3,175







N/AFiscal 2016


98,300



3,738







N/AFiscal 2015


116,200



2,621







N/AFiscal 2014


143,200



2,421







N/AFiscal 2013


61,400



4,388







N/AFiscal 2012


39,100



5,453







N/AFiscal 2011


8,600



21,051







N/A  (1)
Total amount of each class of senior securities outstanding at the end of the period presented. (2)
The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our
consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage
Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit was divided based on the amount outstanding at the end of the period for each. As of December 31, 2018, asset
coverage was 253.2%. (3)
The amount to which such class of senior security would be entitled upon the involuntary liquidation of the
issuer in preference to any security junior to it. (4)
Not applicable, we do not have senior securities that are registered for public trading.  106




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  Note 9(a). Income Tax Information and Distributions to Stockholders The tax character of distributions for the fiscal years ended December 31, 2018, 2017 and 2016 were as follows:  2018


2017


2016Ordinary income

$
22,617



100.0
%

$
22,604



100.0
%

$
18,316



100.0
%Capital gains






0.0
%






0.0
%






0.0
%Return of capital






0.0
%






0.0
%






0.0
%Total distributions

$
22,617



100.0
%

$
22,604



100.0
%

$
18,316



100.0
% As of December 31, 2018, 2017 and 2016 the total accumulated earnings (loss) on a tax basis were as
follows (1):  2018


2017


2016Undistributed ordinary income

$



$
640


$
1,595Undistributed long-term net capital gains










Total undistributed net earnings






640



1,595Other book/tax temporary differences


(362
)


756



1,084Post-October capital losses










Capital loss carryforward


(16,714
)


(6,565
)


(6,026
)Net unrealized appreciation (depreciation) investments


(10,007
)


(9,627
)


(10,676
)Total tax accumulated earnings (loss)

$
(27,083
)

$
(14,796
)

$
(14,023
)  (1)
Tax information for the fiscal years ended December 31, 2018, 2017 and 2016 are/were estimates and are not
final until the Company files its tax returns, typically in October each year. The Company recognizes in its
consolidated financial statements the tax effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. To the best of our knowledge, we did not have any uncertain tax
positions that met the recognition or measurement criteria of ASC 740-10-25 nor did we have any unrecognized tax benefits as of the periods presented herein. Although we
file federal and state tax returns, our major tax jurisdiction is federal. Our tax returns for each of our federal tax years since 2015 remain subject to examination by the Internal Revenue Service and the state department of revenue. The capital
loss carryforwards shown above do not expire. Note 9(b). Other Tax Information (unaudited) No distributions paid during the fiscal years ended December 31, 2018, 2017 or 2016 were eligible for qualified dividend income treatment
or were eligible for the 70% dividends received deduction for corporate stockholders. For the fiscal years ended December 31, 2018, 2017, and 2016, 85.92%, 95.53% and 99.34%, respectively, of each of the distributions paid during the year
represent interest-related dividends. For the fiscal years ended December 31, 2018, 2017 and 2016, none of the distributions represent short-term capital gains dividends.  107




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share amounts)  Note 10. Gemino Healthcare Finance, LLC We acquired Gemino Healthcare Finance, LLC (d/b/a Gemino Senior Secured Healthcare Finance) (Gemino) on September 30, 2013.
Gemino is a commercial finance company that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial
investment in Gemino was $32,839. The management team of Gemino co-invested in the transaction and continues to lead Gemino. As of December 31, 2018, Geminos management team and Solar Senior own
approximately 7% and 93% of the equity in Gemino, respectively. Concurrent with the closing of the transaction, Gemino entered into a
new, four-year, non-recourse, $100,000 credit facility with non-affiliates, which was expandable to $150,000 under its accordion feature. Effective March 31, 2014,
the credit facility was expanded to $105,000 and again on June 27, 2014 to $110,000. On May 27, 2016, Gemino entered into a new $125,000 credit facility which replaced the previously existing facility. The new facility has similar terms as
compared to the previous facility and includes an accordion feature increase to $200,000 and has a maturity date of May 27, 2020. Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of
December 31, 2018, the portfolio totaled approximately $174,083 of commitments, of which $108,643 were funded, on total assets of $108,640. As of December 31, 2017, the portfolio totaled approximately $176,332 of commitments, of
which $106,620 were funded, on total assets of $110,584. At December 31, 2018, the portfolio consisted of 34 issuers with an average balance of approximately $3,195 versus 29 issuers with an average balance of approximately $3,677 at
December 31, 2017. All of the commitments in Geminos portfolio are floating-rate, senior-secured, cash-pay loans. Geminos credit facility, which is
non-recourse to us, had approximately $75,000 and $75,000 of borrowings outstanding at December 31, 2018 and December 31, 2017, respectively. For the years ended December 31, 2018, 2017 and
2016, Gemino had net income of $3,629, $3,571 and $4,562, respectively, on gross income of $11,542, $11,389 and $13,274, respectively. Due to timing and non-cash items, there may be material differences
between GAAP net income and cash available for distributions. Geminos consolidated financial statements for the fiscal years ended December 31, 2018 and December 31, 2017 are attached as an exhibit to this annual report on Form 10-K. Note 11. Selected Quarterly Financial Data (unaudited)  Quarter Ended

InvestmentIncome


Net InvestmentIncome


Net Realized AndUnrealized Gain(Loss) on Assets


Net Increase(Decrease)InNet Assets FromOperationsTotal


PerShare


Total


PerShare


Total


PerShare


Total


PerShareDecember 31, 2018

$
9,984


$
0.62


$
5,550


$
0.35


$
(8,179
)

$
(0.51
)

$
(2,629
)

$
(0.16
)September 30, 2018


11,013



0.69



5,762



0.36



(356
)


(0.02
)


5,406



0.34June 30, 2018


9,471



0.59



5,654



0.35



(135
)


(0.01
)


5,519



0.34March 31, 2018


9,341



0.58



5,654



0.35



(137
)


(0.01
)


5,517



0.34December 31, 2017

$
9,047


$
0.56


$
5,653


$
0.35


$
582


$
0.04


$
6,235


$
0.39September 30, 2017


7,966



0.50



5,652



0.35



360



0.02



6,012



0.37June 30, 2017


7,658



0.48



5,651



0.35



(422
)


(0.02
)


5,229



0.33March 31, 2017


7,496



0.47



5,649



0.35



262



0.02



5,911



0.37  108




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share and per share amounts)  Note 12. Commitments and Contingencies The Company had unfunded debt and equity commitments to various revolving and delayed draw loans as well as to Gemino Healthcare Finance, LLC.
The total amount of these unfunded commitments as of December 31, 2018 and December 31, 2017 is $23,619 and $27,472, respectively, comprised of the following:  December 31,2018


December 31,2017Rubius Therapeutics, Inc.**

$
4,121


$
MSHC, Inc.


3,326



The Hilb Group, LLC & Gencorp Insurance Group, Inc.


3,156



332WIRB-Copernicus Group, Inc.


2,649



DISA Holdings Acquisition Corp.


2,586



MRI Software LLC


2,446



2,361Solara Medical Supplies, Inc.


2,056



Gemino Healthcare Finance, LLC*


1,400



5,000GenMark Diagnostics, Inc.


700



Engineering Solutions & Products, LLC


535



1,736Centria Healthcare LLC


333



AQA Acquisition Holding, Inc.


142



TwentyEighty, Inc.


140



140MHE Intermediate Holdings, LLC


29



983VetCor Professional Practices LLC






6,721Edgewood Partners Holdings, LLC






Alera Group Intermediate Holdings, Inc.






4,695VT Buyer Acquisition Corp. (Veritext)






3,450PetVet Care Centers, LLC






1,627Ministry Brands, LLC






427Total Commitments

$
23,619


$
27,472  *
The Company controls the funding of the Gemino commitment and may cancel it at its discretion. **
Commitments are subject to the portfolio company achieving certain milestones. As of December 31, 2018,
these milestones have not yet been achieved, and as such the portfolio company would not have been able to draw on any of the stated commitment at that time. As of December 31, 2018 and December 31, 2017, the Company had sufficient cash available and/or liquid securities available to fund
its commitments. Note 13. First Lien Loan Program LLC On September 10, 2014, the Company entered into a limited liability company agreement to create FLLP with Voya Investment Management LLC
(Voya). Voya acts as the investment advisor for several wholly-owned insurance subsidiaries of Voya Financial, Inc. (NYSE: VOYA). The joint venture vehicle, structured as an unconsolidated Delaware limited liability company, invested
primarily in senior secured floating rate term loans to middle market companies predominantly owned by private equity sponsors or entrepreneurs. The Company and Voya had committed to provide $50,750 and $7,250, respectively, of capital to the joint
venture. All portfolio decisions and generally all other decisions in respect of the FLLP had to be approved by an investment committee of the FLLP consisting of representatives of the Company and Voya (with approval from a  109




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share and per share amounts)  representative of each required). On February 13, 2015, FLLP commenced operations. On February 13, 2015, FLLP as transferor and FLLP 2015-1, LLC,
a newly formed wholly-owned subsidiary of FLLP, as borrower entered into the FLLP Facility with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior Capital Ltd. acts as servicer under the FLLP Facility. The FLLP Facility
was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP
2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other
customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to
$100,000 and extending the maturity date to August 16, 2021. On September 18, 2018, the Company acquired Voyas share of the equity in FLLP to hold 100% of the equity in FLLP.    As such, the Company consolidated
FLLP as of this date. For financial reporting purposes, assets consolidated were recorded at fair value and the cost basis of the assets consolidated were carried forward to align with the ongoing reporting of the Companys realized and
unrealized gains and losses. Also due to the consolidation, the then $3,210 in unrealized depreciation on the Companys equity investment in FLLP was reflected as unrealized depreciation in our consolidated assets and liabilities as well as an
adjustment to net increase in net assets resulting from operations on the Companys consolidated statement of cash flows. The effect of consolidation did not affect the Companys net assets at September 30, 2018. On
December 19, 2018, FLLP and the Company merged, with the Company the surviving entity. FLLP 2015-1 LLC is now a wholly-owned subsidiary of the Company and borrowings under the FLLP Facility are
consolidated. Note 14. Solar Life Science Program LLC On February 22, 2017, the Company and Solar Capital Ltd. formed LSJV with an affiliate of Deerfield Management.    The
Company committed $75,000 to LSJV. On August 16, 2018, the LSJV was dissolved, without commencing operations. Note 15. North Mill Capital LLC We acquired 100% of the equity interests of North Mill Capital LLC (NMC) on October 20, 2017. NMC is a leading
asset-backed lending commercial finance company that provides senior secured asset-backed financings to U.S. based
small-to-medium-sized businesses primarily in the manufacturing, services and distribution industries. We invested approximately
$51,000 to effect the transaction. Subsequently, the Company contributed 1% of its equity interest in NMC to ESP SSC Corporation.    Immediately thereafter, the Company and ESP SSC Corporation contributed their equity interests
to NorthMill LLC (North Mill). On May 1, 2018, North Mill merged with and into NMC, with NMC being the surviving company. The Company and ESP SSC Corporation own 99% and 1% of the equity interests of NMC, respectively. The
management team of NMC continues to lead NMC. NMC currently manages a highly diverse portfolio of directly-originated and underwritten
senior-secured commitments. As of December 31, 2018, the portfolio totaled approximately $247,259 of commitments, of which $122,323 were funded, on total assets of $155,568. As of December 31, 2017, the portfolio totaled
approximately $283,461 of commitments, of which $151,604 were funded, on total assets of $176,354. At December 31, 2018, the portfolio consisted of 80 issuers with an average balance of approximately $1,529 versus 92 issuers with an
average balance of approximately $1,600 at December 31, 2017. NMC has a senior credit facility with a bank lending group for $160,000 which expires on October 20, 2020. Borrowings are secured by substantially all of NMCs
assets. NMCs credit facility, which is non-recourse to us, had approximately $88,892 and $116,574 of borrowings outstanding at December 31, 2018 and December 31, 2017, respectively. For
the  110




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2018 (in thousands, except share and per share amounts)  year ended December 31, 2018 and the period October 20, 2017 through December 31, 2017, NMC had net income (loss) of ($2,754) and $372, respectively, on gross income of $21,789 and
$3,097, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NMCs funded
commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NMC will be able to maintain consistent dividend payments to us. NMCs consolidated financial statements for the fiscal years ended
December 31, 2018 and December 31, 2017 are attached as an exhibit to this annual report on Form 10-K. Note 16. Capital Share Transactions As
of December 31, 2018 and December 31, 2017, 200,000,000 shares of $0.01 par value capital stock were authorized. Transactions
in capital stock were as follows:  Shares


AmountYear endedDecember 31, 2018


Year endedDecember 31, 2017


Year endedDecember 31, 2018


Year endedDecember 31, 2017Shares issued in reinvestment of distributions


3,755



11,719


$
65


$
204Net increase


3,755



11,719


$
65


$
204 Note 17. Subsequent Events The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated
financial statements were issued. On January 8, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable
on February 1, 2019 to holders of record as of January 24, 2019. On February 6, 2019, our board of directors declared a
monthly dividend of $0.1175 per share payable on March 1, 2019 to holders of record as of February 21, 2019. On
February 21, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on April 3, 2019 to holders of record as of March 21, 2019.  111




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##### Table of Contents

Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.  Item 9A.
Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures As of December 31, 2018 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including
the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only
reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures. (b) Managements Report on Internal Control Over Financial Reporting Managements Report on Internal Control Over Financial Reporting, which appears in Item 8 of this
Form 10-K, is incorporated by reference herein. (c) Attestation Report of the
Independent Registered Public Accounting Firm Our independent registered public accounting firm, KPMG LLP, has issued an
attestation report on the Companys internal control over financial reporting, which is set forth above under the heading Report of Independent Registered Public Accounting Firm in Item 8. (d) Changes in Internal Controls Over Financial Reporting Management has not identified any change in the Companys internal control over financial reporting that occurred during the fourth fiscal
quarter of 2018 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.  Item 9B.
Other Information None.  112




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##### Table of Contents

PART III  Item 10.
Directors, Executive Officers and Corporate Governance Information about Directors Certain
information with respect to each of the current directors is set forth below, including their names, ages, a brief description of their recent business experience, including present occupations and employment, certain directorships that each person
holds, the year in which each person became a director of the Company, and a discussion of their particular experience, qualifications, attributes or skills that lead us to conclude that such individual should serve as a director of the Company, in
light of the Companys business and structure. There were no legal proceedings of the type described in Item 401(f) of Regulation S-K in the past 10 years against any of the directors or
officers of the Company and none are currently pending. There is no arrangement or understanding between any of the Companys directors or officers pursuant to which they were selected as directors or officers and the Company or any other
person or entity. Mr. Gross is an interested person of Solar Senior Capital as defined in the Investment Company Act of 1940 (the
1940 Act) due to his position as the Chief Executive Officer and President of the Company and a managing member of Solar Capital Partners, LLC (Solar Capital Partners) the Companys investment adviser. Mr. Spohler
is an interested person of the Company as defined in the 1940 Act due to his position as the Chief Operating Officer of the Company and a managing member of Solar Capital Partners, the Companys investment adviser. Each of
Mr. Wachter, Mr. Hochberg and Mr. Potter is not an interested person of the Company as defined in the 1940 Act.  Name, Address and Age(1)

Position(s) Held
with Company

Terms of Office and
Length of Time
Served

Principal Occupation(s)
During Past 5 Years

Other Directorships Held
by Director or Nominee
for Director During Past
5 Years(2)Independent DirectorDavid S. Wachter, 55

Director

Class I Director since 2011; Term expires 2021.

Founding Partner, Managing Director and President of W Capital Partners, a private equity fund manager, since 2001.

Director of Solar Capital Ltd. since 2007, SCP Private Credit Income BDC LLC since 2018 and of several private companies. Mr. Wachters extensive knowledge of private equity and investment banking provides the board of directors with the
valuable insight of an experienced financial manager.  113




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##### Table of Contents

Name, Address and Age(1)

Position(s) Held
with Company

Terms of Office and
Length of Time
Served

Principal Occupation(s)
During Past 5 Years

Other Directorships Held
by Director or Nominee
for Director During Past
5 Years(2)Interested DirectorBruce Spohler, 58

Director; Chief
Operating Officer.

Class II Director since 2010; Term expires 2019.

Chief Operating Officer of SCP Private Credit Income BDC LLS since 2018, Solar Senior Capital Ltd. since 2010 and of Solar Capital Ltd. since 2007; previously, Managing Director and a former
Co- Head of U.S. Leveraged Finance for CIBC World Markets.

Director of Solar Capital Ltd. since 2009 and SCP Private Credit Income BDC LLC since 2018. Mr. Spohlers depth of experience in managerial positions in investment management, leveraged finance and financial
services, as well as his intimate knowledge of the Companys business and operations, gives the board of directors valuable industry-specific knowledge and expertise on these and other matters.  114




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##### Table of Contents

Name, Address and Age(1)

Position(s) Held
with Company

Terms of Office and
Length of Time
Served

Principal Occupation(s)
During Past 5 Years

Other Directorships Held
by Director or Nominee
for Director During Past
5 Years(2)Independent DirectorSteven Hochberg, 57

Director

Class II Director since 2011; Term expires 2019.

Partner at Deerfield Management, a healthcare investment firm, since 2013. Co-founder and manager of Ascent Biomedical Ventures, a venture capital firm focused on early stage investment and
development of biomedical companies, since 2004.

Partner at Deerfield Management, a healthcare investment firm, since 2013. Co-founder and manager of Ascent Biomedical Ventures, a venture capital firm focused on early stage investment and
development of biomedical companies, since 2004. Director of Solar Capital Ltd. since 2007 and SCP Private Credit Income BDC LLC since 2018. Since 2011, Mr. Hochberg had been the Chairman of the Board of Continuum Health Partners until its
merger with Mount Sinai in 2013, where he is the Senior Vice Chairman of the Mount Sinai Health System, a non-profit healthcare integrated delivery system in New York City. Director of DFB Healthcare
Acquisitions Corp., a newly organized special purchase acquisition company. Director of the Cardiovascular Research Foundation, an organization focused on advancing new technologies and education in the field of cardiovascular medicine. Mr. Hochbergs varied experience in investing in medical technology companies provides the board of directors with
particular knowledge of this field, and his role as chairman of other companies board of directors brings the perspective of a knowledgeable corporate leader.  115




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##### Table of Contents

Name, Address and Age(1)

Position(s) Held
with Company

Terms of Office and
Length of Time
Served

Principal Occupation(s)
During Past 5 Years

Other Directorships Held
by Director or Nominee
for Director During Past
5 Years(2)Interested DirectorMichael S. Gross, 57

Chairman of the Board of
Directors, Chief Executive
Officer and President.

Class III Director since
2010; Term expires 2020.

Chairman of the Board of Directors, Chief Executive Officer and President of SCP Private Credit Income BDC LLC since 2018, Solar Senior Capital Ltd. since 2010 and of Solar Capital Ltd. since 2007; President and Chief
Executive Officer of Apollo Investment Corporation from 2004 to 2006.

Chairman of the Board of Directors, Chief Executive Officer and President of SCP Private Credit Income BDC LLC since 2018 and Solar Capital Ltd. since 2007; Chairman of the Board of Directors of Global Ship Lease Inc.; Director of
Saks, Inc. (1992-2013) and Jarden Corporation (2007-2016); Chairman of the Board of Mt. Sinai Childrens Center Foundation; Director of New York Road Runners; Member of the Kellogg Global Advisory Board; and Member of the Ross School Advisory
Board at the University of Michigan. Mr. Gross intimate knowledge of the business and operations of Solar Capital Partners, extensive familiarity with
the financial industry and the investment management process in particular, and experience as a director of other public and private companies gives the board of directors valuable insight and positions him well to continue to serve as the Chairman
of our board of directors.  116




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##### Table of Contents

Name, Address and Age(1)

Position(s) Held
with Company

Terms of Office and
Length of Time
Served

Principal Occupation(s)
During Past 5 Years

Other Directorships Held
by Director or Nominee
for Director During Past
5 Years(2)Independent DirectorLeonard A. Potter, 57

Director

Class III Director since 2011; Term expires 2020.

President and Chief Investment Officer of Wildcat Capital Management LLC since 2011; Chief Executive Officer of Infinity Q Capital Management, LLC since 2014; Chief Investment Officer of Salt Creek Hospitality from 2009 to 2011;
Managing Director of Soros Private Equity at Soros Fund Management LLC from 2002 to 2009.

Director of SCP Private Credit Income BDC LLC since 2018, Solar Capital Ltd. since 2009, Hilton Grand Vacations Inc. since 2017, GSV Capital Corp. since 2011, Crumbs Bake Shop, Inc. from 2009 to 2014, and several private
companies. Mr. Potters experience practicing as a corporate lawyer provides valuable insight to the board of directors on
regulatory and risk management issues. In addition, his tenure in private equity and other investments and service as a director of both public and private companies provide industry-specific knowledge and expertise to the board of directors.  (1)
The business address of the director nominee and other directors is c/o Solar Senior Capital Ltd., 500 Park
Avenue, New York, New York 10022. (2)
All of the Companys directors also serve as directors of Solar Capital Ltd. and SCP Private Credit Income
BDC LLC, which are investment companies that have each elected to be regulated as a business development company (BDC) and for which Solar Capital Partners serves as investment adviser. Mr. Potter also serves as a director of GSV
Capital Corp., which is a closed-end management investment company that has elected to be regulated as a BDC.  117




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##### Table of Contents

Information about Executive Officers Who Are Not Directors The following information, as of December 31, 2018, pertains to our executive officers who are not directors of the Company.  Name, Address, and Age(1)

Position(s) Held
with Company

Principal Occupation(s) During Past 5 YearsRichard L. Peteka, 57

Chief Financial Officer, Treasurer and Secretary

Chief Financial Officer, Treasurer and Secretary of the Company and of Solar Capital Ltd. since May 2012 and of SCP Private Credit Income BDC LLC since June 2018. Mr. Peteka joined the Company from Apollo Investment
Corporation, a publicly-traded business development company, where he served from 2004 to 2012 as the Chief Financial Officer and Treasurer.Guy Talarico, 63

Chief Compliance Officer

Chief Compliance Officer of Solar Capital Ltd. since 2009, Solar Senior Capital Ltd. since 2011, Solar Capital Partners, LLC since February 2016 and SCP Private Credit Income BDC LLC since June 2018  all affiliated entities;
and Chief Executive Officer of Alaric Compliance Services, LLC (successor to EOS Compliance Services LLC) since December 2005. In conjunction with this primary occupation, Mr. Talarico has served and continues to serve as Chief Compliance
Officer for other business development companies, funds, and/or investment advisers who are not affiliated with the Solar Capital entities.  (1)
The business address of the executive officers is c/o Solar Capital Ltd., 500 Park Avenue, New York, New York
10022. Audit Committee The Audit Committee operates pursuant to a charter approved by our board of directors, a copy of which is available on our website athttp://www.solarseniorcap.com. The charter sets forth the responsibilities of the Audit Committee. The Audit Committees responsibilities include selecting the independent registered public accounting firm for the Company, reviewing with
such independent registered public accounting firm the planning, scope and results of their audit of the Companys financial statements, pre-approving the fees for services performed, reviewing with the
independent registered public accounting firm the adequacy of internal control systems, reviewing the Companys annual financial statements and periodic filings and receiving the Companys audit reports and financial statements. The Audit
Committee also establishes guidelines and makes recommendations to our board of directors regarding the valuation of our investments. The Audit Committee is responsible for aiding our board of directors in determining the fair value of debt and
equity securities that are not publicly traded or for which current market values are not readily available. The board of directors and Audit Committee utilize the services of nationally recognized third-party valuation firms to help determine the
fair value of these securities. The Audit Committee is currently composed of Messrs. Hochberg, Wachter and Potter, all of whom are considered independent under the rules of the NASDAQ Stock Market and are not interested persons of the
Company as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Hochberg serves as Chairman of the Audit Committee. Our board of directors has determined that Mr. Hochberg is an audit  118




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##### Table of Contents

committee financial expert as that term is defined under Item 407 of Regulation S-K, as promulgated under the Securities Exchange Act of 1934,
as amended (the Exchange Act). Mr. Hochberg meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act. Communication with the Board of Directors Stockholders with questions about the Company are encouraged to contact the Companys investor relations department. However, if
stockholders believe that their questions have not been addressed, they may communicate with the Companys board of directors by sending their communications to Solar Senior Capital Ltd., c/o Richard L. Peteka, Corporate Secretary, 500 Park
Avenue, New York, New York 10022. All stockholder communications received in this manner will be delivered to one or more members of the board of directors. Section 16(a) Beneficial Ownership Reporting Compliance Pursuant to Section 16(a) of the Exchange Act, the Companys directors and executive officers, and any persons holding more than 10%
of its common stock, are required to report their beneficial ownership and any changes therein to the SEC and the Company. Specific due dates for those reports have been established, and the Company is required to report herein any failure to file
such reports by those due dates. Based solely on a review of copies of such reports and written representations delivered to the Company by such persons, the Company believes that there were no violations of Section 16(a) by such persons during
the fiscal year ended December 31, 2018. Code of Ethics The Company has adopted a code of ethics that applies to, among others, its senior officers, including its Chief Executive Officer and its
Chief Financial Officer, as well as every officer, director and employee of the Company. The Companys code of ethics can be accessed via its website athttp://www.solarseniorcap.com . The Company intends to disclose amendments to or
waivers from a required provision of the code of ethics on Form 8-K. Nomination of Directors There have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors implemented since
the filing of our Proxy Statement for our 2018 Annual Meeting of Stockholders.  Item 11.
Executive Compensation Compensation of Executive Officers None
of our officers receives direct compensation from the Company. As a result, we do not engage any compensation consultants. Mr. Gross, our Chief Executive Officer and President, and Mr. Spohler, our Chief Operating Officer, through their
ownership interest in Solar Capital Partners, our investment adviser, are entitled to a portion of any profits earned by Solar Capital Partners, which includes any fees payable by us to Solar Capital Partners under the terms of the Advisory
Agreement, less expenses incurred by Solar Capital Partners in performing its services under the Advisory Agreement. Messrs. Gross and Spohler do not receive any additional compensation from Solar Capital Partners in connection with the management
of our portfolio. Mr. Peteka, our Chief Financial Officer, Treasurer and Secretary and, through Alaric Compliance Services, LLC, Guy
Talarico, our Chief Compliance Officer, are paid by Solar Capital Management, our administrator, subject to reimbursement by us of an allocable portion of such compensation for services rendered by such persons to the Company. To the extent that
Solar Capital Management outsources any of its functions, we will pay the fees associated with such functions on a direct basis without profit to Solar Capital Management.  119




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##### Table of Contents

Compensation of Directors The following table sets forth compensation of the Companys directors, for the year ended December 31, 2018.  Name

Fees Earned orPaid in Cash(1)


StockAwards(2)


All OtherCompensation


TotalInterested DirectorsMichael S. Gross














Bruce Spohler














Independent DirectorsSteven Hochberg

$
64,500










$
64,500David S. Wachter

$
62,000










$
62,000Leonard A. Potter

$
61,250










$
61,250  (1)
For a discussion of the independent directors compensation, see below. (2)
We do not maintain a stock or option plan, non-equity incentive plan or
pension plan for our directors. However, our independent directors have the option to receive all or a portion of the directors fees to which they would otherwise be entitled in the form of shares of our common stock issued at a price per
share equal to the greater of our then current net asset value per share or the market price at the time of payment. No shares were issued to any of our independent directors in lieu of cash during 2018. Our independent directors annual fee is $50,000. The independent directors also receive $1,250 ($500 if participating
telephonically) plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and $500 plus reimbursement of
reasonable out-of-pocket expenses incurred in connection with each committee meeting attended. In addition, the Chairman of the Audit Committee receives an annual fee of
$3,750, the Chairman of the Nominating and Corporate Governance Committee receives an annual fee of $1,250 and the Chairman of the Compensation Committee receives an annual fee of $1,250. Further, we purchase directors and officers
liability insurance on behalf of our directors and officers. In addition, no compensation was paid to directors who are interested persons of the Company as defined in the 1940 Act. Compensation Committee The Compensation
Committee operates pursuant to a charter approved by our board of directors, a copy of which is available on our website athttp://www.solarseniorcap.com. The charter sets forth the responsibilities of the Compensation Committee. The
Compensation Committee is responsible for reviewing and recommending for approval to our board of directors the Advisory Agreement and the Administration Agreement. In addition, although we do not directly compensate our executive officers
currently, to the extent that we do so in the future, the Compensation Committee would also be responsible for reviewing and evaluating their compensation and making recommendations to the board of directors regarding their compensation. Lastly, the
compensation committee would produce a report on our executive compensation practices and policies for inclusion in our proxy statement if required by applicable proxy rules and regulations and, if applicable, make recommendations to the board of
directors on matters related to compensation generally. The Compensation Committee has the authority to engage compensation consultants and to delegate their duties and responsibilities to a member or to a subcommittee of the Compensation Committee.
The members of the Compensation Committee are Messrs. Hochberg, Wachter and Potter, all of whom are considered independent under the rules of the NASDAQ Stock Market and are not interested persons of the Company as that term is defined
in Section 2(a)(19) of the 1940 Act. Mr. Potter serves as Chairman of the Compensation Committee.  120




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##### Table of Contents

Compensation Committee Interlocks and Insider Participation During fiscal year 2018 none of the Companys executive officers served on the board of directors (or a compensation committee thereof or other board
committee performing equivalent functions) of any entities that had one or more executive officers serve on the Compensation Committee of the Company or on the Board of Directors of the Company. Compensation Committee Report Currently, none of our
executive officers are compensated by the Company, and as such the Company is not required to produce a report on executive officer compensation for inclusion in our annual report on Form 10-K.  Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth, as of February 15, 2019, the beneficial ownership of each current director, the
nominee for director, the Companys executive officers, each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and the executive officers and directors as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (SEC) and includes
voting or investment power with respect to the securities. Ownership information for those persons who beneficially own 5% or more of our shares of common stock is based upon reports filed by such persons with the SEC and other information obtained
from such persons, if available. Unless otherwise indicated, the Company believes that each beneficial owner set forth in the table has
sole voting and investment power and has the same address as the Company. Our address is 500 Park Avenue, New York, New York 10022.  Name and Address of Beneficial Owner

Number of SharesOwned Beneficially(1)


Percentageof Class(2)Interested DirectorsMichael S. Gross(3)(4)


868,186



5.4
%Bruce Spohler(3)


539,017



3.4
%Independent DirectorsSteven Hochberg


20,000



*Leonard A. Potter


6,250



*David S. Wachter


8,863



*Executive OfficersRichard L. Peteka


6,250



*Guy Talarico






All executive officers and directors as a group (7 persons)


913,549



5.7
%John W. Jordan II(5)


981,427



6.1
%JPMorgan Chase & Co.(6)


805,964



5.0
%  *
Represents less than one percent. (1)
Beneficial ownership has been determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act). Assumes no other purchases or sales of our common stock since the most recently available SEC filings. This
assumption has been made under the rules and regulations of the SEC and does not reflect any knowledge that we have with respect to the present intent of the beneficial owners of our common stock listed in this table. (2)
Based on a total of 16,040,485 shares of the Companys common stock issued and outstanding as of
February 15, 2019.  121




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##### Table of Contents

(3)
Includes 455,500 shares held by Solar Senior Capital Investors, LLC and 100 shares held by Solar Capital
Management, LLC, a portion of both of which may be deemed to be indirectly beneficially owned by Michael S. Gross and by Bruce Spohler by virtue of their collective ownership interests therein. Also includes 79,417 shares held by Solar Capital
Partners Employee Stock Plan LLC, which is controlled by Solar Capital Partners, LLC. Mr. Gross and Mr. Spohler may be deemed to indirectly beneficially own a portion of the shares held by Solar Capital Partners Employee Stock Plan LLC by
virtue of their collective ownership interest in Solar Capital Partners, LLC. Each of Mr. Gross and Mr. Spohler disclaim beneficial ownership of any shares of our common stock directly held by Solar Capital Partners Employee Stock Plan
LLC, Solar Senior Capital Investors, LLC or Solar Capital Management, LLC, except to the extent of their respective pecuniary interest therein. (4)
Includes (i) 4,844 shares directly held by Michael S. Gross profit sharing plan (the Profit
Sharing Plan), which may be deemed to be directly beneficially owned by Mr. Gross as the sole participant in the Profit Sharing Plan, and (ii) 96,717 shares directly held by a grantor retained annuity trust (GRAT) setup
by and for Michael S. Gross. As the sole trustee of the GRAT, Mr. Gross may be deemed to directly beneficially own all of the shares held by the GRAT. (5)
Based on information contained in Schedule 13G filed on March 28, 2018 by John W. Jordan II. Includes
856,726 shares held by The John W. Jordan II Revocable Trust, a trust formed under the laws of Illinois (the JWJ Trust) and 124,701 shares held by The GSJ 2003 Trust. Mr. Jordan is the trustee of the JWJ Trust and the GSJ 2003 Trust
and may be deemed to have voting and dispositive power with respect to the shares of our common stock held by these trusts. The address for Mr. Jordan is 875 North Michigan Avenue, Suite 4020, Chicago, Illinois 60611. (6)
Based on information contained in Schedule 13G filed on January 14, 2019 by JPMorgan Chase &
Co. Such securities are held by certain investment vehicles controlled and/or managed by JPMorgan Chase & Co. or its affiliates. The address for JPMorgan Chase & Co. is 270 Park Avenue, New York, NY 10022. Set forth below is the dollar range of equity securities beneficially owned by each of our directors as of
February 15, 2019. We are not part of a family of investment companies, as that term is defined in the 1940 Act.  Name of Director

Dollar Range of EquitySecurities BeneficiallyOwned(1)(2)Interested DirectorsMichael S. Gross


Over $100,000Bruce Spohler


Over $100,000Independent DirectorsSteven Hochberg


Over $100,000Leonard A. Potter


Over $100,000David S. Wachter


Over $100,000  (1)
The dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or Over $100,000. (2)
The dollar range of equity securities beneficially owned in us is based on the closing price for our common
stock of $16.79 on February 15, 2019 on the NASDAQ Global Select Market. Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act.  Item 13.
Certain Relationships and Related Transactions, and Director Independence We have entered into the Advisory Agreement with Solar Capital Partners. Mr. Gross, our Chairman, Chief Executive Officer and President,
and Mr. Spohler, our Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial and controlling interests in, Solar Capital Partners. In addition, Mr. Peteka, our Chief
Financial Officer, Treasurer and Secretary, serves as the Chief Financial Officer for Solar Capital Partners.  122




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Solar Capital Partners and its affiliates may also manage other funds in the future that may
have investment mandates that are similar, in whole and in part, with ours. For example, Solar Capital Partners presently serves as investment adviser to private funds and managed accounts as well as to Solar Capital Ltd., a publicly traded BDC,
which focuses on investing primarily in senior secured loans, mezzanine loans and equity securities. In addition, Michael S. Gross, our Chairman and Chief Executive Officer, Bruce Spohler, our Chief Operating Officer, and Richard L. Peteka, our
Chief Financial Officer, serve in similar capacities for Solar Capital Ltd. Solar Capital Partners and certain investment advisory
affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliates may
determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and
interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners allocation procedures. Related party
transactions may occur among Solar Senior Capital Ltd., Gemino Healthcare Finance, LLC and North Mill Capital LLC. These transactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Gemino
Healthcare Finance, LLC or North Mill Capital LLC. In addition, we have adopted a formal code of ethics that governs the conduct of our
officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law. Regulatory restrictions limit our ability to invest in any portfolio company in which any affiliate currently has an investment. The Company
obtained an exemptive order from the SEC on July 28, 2014 (the Prior Exemptive Order). The Prior Exemptive Order permitted us to participate in negotiated co-investment transactions with
certain affiliates, each of whose investment adviser is Solar Capital Partners, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors,
and pursuant to the conditions to the Prior Exemptive Order. On June 13, 2017, the Company, Solar Capital Ltd., and Solar Capital Partners received an exemptive order that supersedes the Prior Exemptive Order (the New Exemptive
Order) and extends the relief granted in the Prior Exemptive Order such that it no longer applies to certain affiliates only if their respective investment adviser is Solar Capital Partners, but also applies to certain affiliates whose
investment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital Partners and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The terms and
conditions of the New Exemptive Order are otherwise substantially similar to the Prior Exemptive Order. We believe that it will be advantageous for us to co-invest with funds managed by Solar Capital Partners
where such investment is consistent with the investment objectives, investment positions, investment policies, investment strategy, investment restrictions, regulatory requirements and other pertinent factors applicable to us. We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has agreed to grant us a non-exclusive, royalty-free license to use the name Solar Senior Capital. In addition, pursuant to the terms of the Administration Agreement, Solar Capital Management provides us with the office
facilities and administrative services necessary to conduct our day-to-day operations. Board Consideration of the Investment Advisory and Management Agreement Our board of directors determined at a meeting held on November 5, 2018, to re-approve the
Advisory Agreement between the Company and Solar Capital Partners. In its consideration of the re-approval of the Advisory Agreement, the board of directors focused on information it had received relating to,
among other things:  

the nature, extent and quality of advisory and other services provided by Solar Capital Partners, including
information about the investment performance of the Company relative to its stated  123




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objectives and in comparison to the performance of the Companys peer group and relevant market indices, and concluded that such advisory and other services are satisfactory and the
Companys investment performance is reasonable;  

the experience and qualifications of the personnel providing such advisory and other services, including
information about the backgrounds of the investment personnel, the allocation of responsibilities among such personnel and the process by which investment decisions are made, and concluded that the investment personnel of Solar Capital Partners have
extensive experience and are well qualified to provide advisory and other services to the Company;  

the current fee structure, the existence of any fee waivers, and the Companys anticipated expense ratios in
relation to those of other investment companies having comparable investment policies and limitations, and concluded that the current fee structure is reasonable;  

the advisory fees charged by Solar Capital Partners to the Company, to Solar Capital Ltd. and to SCP Private
Credit Income BDC LLC, and comparative data regarding the advisory fees charged by other investment advisers to business development companies with similar investment objectives, and concluded that the advisory fees charged by Solar Capital Partners
to the Company are reasonable;  

the direct and indirect costs, including for personnel and office facilities, that are incurred by Solar Capital
Partners and its affiliates in performing services for the Company and the basis of determining and allocating these costs, and concluded that the direct and indirect costs, including the allocation of such costs, are reasonable;  

possible economies of scale arising from the Companys size and/or anticipated growth, and the extent to
which such economies of scale are reflected in the advisory fees charged by Solar Capital Partners to the Company, and concluded that some economies of scale may be possible in the future;  

other possible benefits to Solar Capital Partners and its affiliates arising from their relationships with the
Company, and concluded that all such other benefits were not material to Solar Capital Partners and its affiliates; and  

possible alternative fee structures or bases for determining fees, and concluded that the Companys current
fee structure and bases for determining fees are satisfactory. Based on the information reviewed and the discussions
detailed above, the board of directors, including a majority of the directors who are not interested persons as defined in the 1940 Act, concluded that the fees payable to Solar Capital Partners pursuant to the Advisory Agreement were
reasonable, and comparable to the fees paid by other management investment companies with similar investment objectives, in relation to the services to be provided. The board of directors did not assign relative weights to the above factors or the
other factors considered by it. Individual members of the board of directors may have given different weights to different factors. Director
Independence In accordance with rules of the NASDAQ Stock Market, our board of directors annually determines each directors
independence. We do not consider a director independent unless the board of directors has determined that he has no material relationship with us. We monitor the relationships of our directors and officers through a questionnaire each director
completes no less frequently than annually and updates periodically as information provided in the most recent questionnaire changes. Our
governance guidelines require any director who has previously been determined to be independent to inform the Chairman of the board of directors, the Chairman of the Nominating and Corporate Governance Committee and our Corporate Secretary of any
change in circumstance that may cause his status as an independent director to change. The board of directors limits membership on the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee to independent
directors.  124




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In order to evaluate the materiality of any such relationship, the board of directors uses
the definition of director independence set forth in the rules promulgated by the NASDAQ Stock Market. Rule 5605(a)(2) provides that a director of a BDC, shall be considered to be independent if he or she is not an interested person of
the Company, as defined in Section 2(a)(19) of the 1940 Act. The board of directors has determined that each of the directors is
independent and has no relationship with us, except as a director and stockholder, with the exception of Michael S. Gross, as a result of his positions as the Chief Executive Officer and President of the Company and a managing member of Solar
Capital Partners, and Bruce Spohler, as a result of his position as Chief Operating Officer of the Company and a managing member of Solar Capital Partners. Indemnification Agreements We have
entered into indemnification agreements with our directors. The indemnification agreements are intended to provide our directors the maximum indemnification permitted under Maryland law and the 1940 Act. Each indemnification agreement provides that
Solar Senior Capital shall indemnify the director who is a party to the agreement (an Indemnitee), including the advancement of legal expenses, if, by reason of his or her corporate status, the Indemnitee is, or is threatened to be, made
a party to or a witness in any threatened, pending, or completed proceeding, to the maximum extent permitted by Maryland law and the 1940 Act.  Item 14.
Principal Accounting Fees and Services KPMG LLP has advised us that neither the firm nor any present member or associate of it has any material financial interest, direct or
indirect, in the Company or its affiliates. Table below in thousands  Fiscal YearEndedDecember 31,2018


Fiscal YearEndedDecember 31,2017Audit Fees

$
275.5


$
290.0Audit-Related Fees


28.5



35.5Tax Fees


38.0



35.8All Other Fees






Total Fees:

$
342.0


$
361.3 Audit Fees: Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and quarterly reviews and services that are normally provided by KPMG LLP in connection with statutory and regulatory filings. Audit-Related Fees: Audit-related services consist of fees billed for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and are not reported under Audit Fees. These services include attest services that are not required by statute or regulation and consultations concerning financial accounting
and reporting standards. Tax Services Fees: Tax services fees consist of fees billed for professional tax services. These services
also include assistance regarding federal, state, and local tax compliance. All Other Fees: Other fees would include fees for
products and services other than the services reported above.  125




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Pre-Approval Policy The Audit Committee has established a pre-approval policy that describes the permitted audit,
audit-related, tax and other services to be provided by KPMG LLP, the Companys independent registered public accounting firm (KPMG). The policy requires that the Audit Committee pre-approve
the audit and non-audit services performed by the independent auditor in order to assure that the provision of such service does not impair the auditors independence. Any requests for audit, audit-related, tax and other services that have not received general
pre-approval must be submitted to the Audit Committee for specific pre-approval, irrespective of the amount, and cannot commence until such approval has been granted.
Normally, pre-approval is provided at regularly scheduled meetings of the Audit Committee. However, the Audit Committee may delegate pre-approval authority to one or
more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not
delegate its responsibilities to pre-approve services performed by the independent registered public accounting firm to management. The Audit Committee pre-approved 100%
of services described in this policy.  126




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PART IV  Item 15.
Exhibits, Financial Statement Schedules a. Documents Filed as Part of this Report The following reports and consolidated financial statements are set forth in Item 8:  Managements Report on Internal Control over Financial
Reporting


78Report of Independent Registered Public Accounting Firm


79Consolidated Statements of Assets 
& Liabilities as of December 31, 2018 and December 31, 2017


81Consolidated Statements of Operations for the years ended December 
31, 2018, 2017 and 2016


82Consolidated Statements of Changes in Net Assets for the years ended December 31,
 2018, 2017 and 2016


83Consolidated Statements of Cash Flows for the years ended December 
31, 2018, 2017 and 2016


84Consolidated Schedules of Investments as of December 
31, 2018 and December 31, 2017


85Notes to Consolidated Financial Statements


91 b. Exhibits The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:  Exhibit
Number

Description3.1

Articles of Amendment and Restatement(1)3.2

Amended and Restated Bylaws(1)4.1

Form of Common Stock Certificate(1)10.1

Dividend Reinvestment Plan(1)10.2

First Amended and Restated Investment Advisory and Management Agreement by and between Registrant and Solar Capital Partners, LLC(5)10.3

Form of Custody Agreement(4)10.4

Amended and Restated Administration Agreement by and between Registrant and Solar Capital Management, LLC(4)10.5

Form of Indemnification Agreement by and between Registrant and each of its directors(1)10.6

Trademark License Agreement by and between Registrant and Solar Capital Partners, LLC(1)10.7

Form of Share Purchase Agreement by and between Registrant and Solar Senior Capital Investors, LLC(1)10.8

Form of Amendment No. 1 to Share Purchase Agreement by and between Registrant and Solar Senior Capital Investors, LLC(2)10.9

Form of Contribution Agreement, dated as of August 
26, 2011, by and between SUNS SPV LLC, as the contributee, and Solar Senior Capital Ltd., as the contributor(3)10.10

Form of Loan and Servicing Agreement, dated as of August 26, 2011 (as amended through the Sixth Amendment dated as of June 
1, 2018), by and among the Registrant, as the servicer and the transferor, SUNS SPV LLC, as the borrower, each of the conduit lenders from time to time party thereto, each of the liquidity banks from time to time party thereto, each of the lender agents
 from time to time party thereto, Citibank, N.A., as the administrative agent and collateral agent, and Wells Fargo Bank, N.A., as the account bank, the backup servicer and the collateral custodian(7)  127




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10.11

Consent and Omnibus Amendment to Transaction Documents by and among the Registrant, FLLP 2015-1, LLC, each of the Conduit Lenders and Institutional Lenders and Wells
 Fargo Bank, N.A., as administrative agent and collateral agent*14.1

Code of Ethics(6)14.2

Code of Business Conduct(4)21.1

Subsidiaries of Solar Senior Capital Ltd.*31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*32.1

Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*32.2

Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*99.1

Gemino Healthcare Finance, LLC and Subsidiary Consolidated Financial Statements years ended December 31, 2018 and December 31, 2017*99.2

North Mill Capital LLC Consolidated Financial Statements year ended December 31, 2018 and period ended December 31, 2017*  (1)
Previously filed in connection with Solar Senior Capital Ltd.s registration statement on Form N-2 (File No. 333-171330) filed on February 14, 2011. (2)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-K filed on February 22, 2012. (3)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 8-K filed on August 31, 2011. (4)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-K filed on February 25, 2014. (5)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-Q filed on August 2, 2016. (6)
Previously filed in connection with Solar Senior Capital Ltd.s registration statement on Form N-2 (File No. 333-223830) filed on March 21, 2018. (7)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-Q filed on August 6, 2018. *
Filed herewith. c. Consolidated Financial Statement Schedules Separate Financial Statements of Subsidiaries Not Consolidated: Consolidated Financial Statements for Gemino Healthcare Finance, LLC and Subsidiary years ended December 31, 2018 and December 31,
2017 are attached as Exhibit 99.1 hereto. Consolidated Financial Statements for North Mill Capital LLC year ended December 31, 2018 and period ended December 31, 2017 are attached as Exhibit 99.2 hereto.  Item 16.
Form 10-K Summary None.  128




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.  SOLAR SENIOR CAPITAL LTD.By:

/S/ MICHAEL S. GROSSMichael S. Gross
Chief Executive Officer, President, Chairman of the Board and Director
Date: February 21, 2019
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacity and on the dates indicated.  Date

Signature

TitleFebruary 21, 2019

/S/    MICHAEL S. GROSS
Michael S. Gross

Chief Executive Officer, President, Chairman of the Board and Director (Principal Executive Officer)February 21, 2019

/S/    STEVEN HOCHBERG
Steven Hochberg

DirectorFebruary 21, 2019

/S/    DAVID S. WACHTER
David S. Wachter

DirectorFebruary 21, 2019

/S/    LEONARD A. POTTER
Leonard A. Potter

DirectorFebruary 21, 2019

/S/    BRUCE SPOHLER
Bruce Spohler

Chief Operating Officer and DirectorFebruary 21, 2019

/S/    RICHARD L. PETEKA
Richard L. Peteka

Chief Financial Officer (Principal Financial Officer) and Secretary  129